Chijet Motor Company Inc

ITEM 3. KEY INFORMATION

Our Holding Company Structure

Neither Chijet Inc. nor Chijet Motor is an operating company but a Cayman Islands holding company with operations primarily conducted by its subsidiaries based in China. We and our subsidiaries are subject to complex and evolving PRC laws and regulations and face various legal and operational risks and uncertainties relating to doing business in China. For example, we and our subsidiaries in the PRC face risks associated with regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, as well as the lack of inspection on our auditors by the PCAOB, which may impact our ability to conduct certain businesses, accept foreign investments, or list and conduct offerings on a United States or other foreign exchange. These risks could result in a material adverse change in our operations and the value of our ordinary shares, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline. For a detailed description of risk related to doing business in China, please refer to risks disclosed under “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China.”

PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations, including data security or anti-monopoly related regulations, in this nature may cause the value of such securities to significantly decline. For more details, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China- The Chinese government may intervene in or influence our operations in China at any time, which could result in a material change in our operations and ability to produce vehicles.”

Risks arising from the legal system in China, including risks and changes regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ordinary shares. For more details, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China- Changes in Chinese policies, regulations, and rules may be quick with little advance notice, and the enforcement of laws of the Chinese government is subject to change and could have a significant impact upon our ability to operate profitably.”

Permissions Required from the PRC Authorities for Our Operations

Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our holding company and our subsidiaries in China. Given the interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities are subject to change, we may be required to obtain additional licenses, permits, filings or approvals for the operations of our businesses in the future. For more detailed information, see “Item 3. Key Information-D. Risk Factors-Risk related to Our Business and Industry- Permissions required for our business from PRC Authorities which have been received to date, but there can be no assurance of future events relating to such permissions.”

The PRC governmental authorities have promulgated PRC laws and regulations relating to cybersecurity review and overseas listings. Under PRC laws and regulations effective as of the date of this annual report, none of us or our PRC subsidiaries (i) is required to obtain any prior permission from the China Securities Regulatory Commission, or the CSRC, (ii) is required to go through a cybersecurity review conducted by the Cyberspace Administration of China, or the CAC, or (iii) has received any notice from any PRC authority requiring us to obtain any prior permissions, in each case in connection with our previous issuance of securities to foreign investors. However, in certain circumstances, the relevant PRC governmental authorities may perform cybersecurity review on us. For more detailed information, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China -There may be changes from time to time in the interpretation and enforcement of PRC laws and regulations and changes in policies, rules, and regulations in China, which may be quick with little advance notice, could limit the legal protections available to you and us.”

Meanwhile, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. For more detailed information, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China- The CSRC has recently released the Trial Measures for China-based companies seeking to conduct overseas offering and listing in foreign markets. Actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers may significantly limit or completely hinder our ability to offer or continue to offer our Ordinary Shares to investors and could cause the value of our Ordinary Shares to significantly decline or such shares to become worthless.”

The Holding Foreign Companies Accountable Act

The Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. The HFCA Act states that if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC will prohibit our ordinary shares from being traded on a national securities exchange or in the over-the-counter trading market in the United States.

On December 2, 2021, the SEC adopted final amendments to its rules implementing the HFCA Act. Such final rules establish procedures that the SEC will follow in (i) determining whether a registrant is a “Commission-Identified Issuer” (a registrant identified by the SEC as having filed an annual report with an audit report issued by a registered public accounting firm that is located in a foreign jurisdiction and that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction) and (ii) prohibiting the trading of an issuer that is a Commission-Identified Issuer for three consecutive years under the HFCA Act. The SEC began identifying Commission-Identified Issuers for the fiscal years beginning after December 18, 2020. A Commission-Identified Issuer is required to comply with the submission and disclosure requirements in the annual report for each year in which it was identified.

As of the date of this annual report, we have not been, and do not expect to be identified by the SEC under the HFCA Act. However, whether the PCAOB will continue to conduct inspections and investigations completely to its satisfaction of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainty and depends on a number of factors out of our, and our auditor’s control including positions taken by authorities of the PRC.

On December 16, 2021, the PCAOB issued its determination that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in the PRC or Hong Kong. This list does not include our auditor, Assentsure PAC.

On August 26, 2022, the PCAOB announced that it had signed a Statement of Protocol (the “Statement of Protocol”) with the CSRC and the Ministry of Finance of China (“MOF”). The terms of the Statement of Protocol would grant the PCAOB complete access to audit work papers and other information so that it may inspect and investigate PCAOB-registered accounting firms headquartered in mainland China and Hong Kong.

On December 15, 2022, the PCAOB announced that it has secured complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate the previous 2021 determination report to the contrary. On December 29, 2022, a legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”) was signed into law by President Biden. The Consolidated Appropriations Act contained, among other things, an identical provision to the Accelerating Holding Foreign Companies Accountable Act, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the Holding Foreign Companies Accountable Act from three years to two. As a result of the Consolidated Appropriations Act, the HFCA Act now also applies if the PCAOB’s inability to inspect or investigate the relevant accounting firm is due to a position taken by an authority in any foreign jurisdiction. The denying jurisdiction does not need to be where the accounting firm is located. Our current auditor, Assentsure PAC, as an auditor of companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Notwithstanding the foregoing, in the future, if there is any regulatory change or step taken by PRC regulators that does not permit our auditor to provide audit documentations located in China to the PCAOB for inspection or investigation, investors may be deprived of the benefits of such inspection. Any audit reports not issued by auditors that are completely inspected by the PCAOB, or a lack of PCAOB inspections of audit work undertaken in China that prevents the PCAOB from regularly evaluating our auditors’ audits and their quality control procedures, could result in a lack of assurance that our financial statements and disclosures are adequate and accurate, then such lack of inspection could cause our securities to be delisted from the stock exchange. See “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China - The Holding Foreign Companies Accountable Act (“HFCAA”), together with recent joint statement by the SEC and PCAOB, Nasdaq rule changes, a determination by the PCAOB that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments add uncertainties to our ability to be listed on U.S. stock exchanges.”

The PCAOB is required under the HFCA Act to make its determination on an annual basis with regards to its ability to inspect and investigate completely accounting firms based in the mainland China and Hong Kong, among other jurisdictions. The possibility of being a “Commission-Identified Issuer” and risk of delisting could continue to adversely affect the trading price of our securities. Should the PCAOB again encounter impediments to inspections and investigations in mainland China or Hong Kong as a result of positions taken by any authority in either jurisdiction, the PCAOB will make determinations under the HFCA Act as and when appropriate.

Cash and Asset Flows through Our Organization

Both Chijet Inc. and Chijet Motor are holding companies with no material operations of their own. We conduct a portion of our operations through our PRC subsidiaries. As a result, our ability to pay dividends depends significantly upon dividends paid by our PRC subsidiaries. If our existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, each of our subsidiaries in China may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonus and welfare funds at its discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. In the future we expect that our in-house vehicle manufacturing will be carried out primarily by Shandong Baoya and FAW Jilin. For more details, see “Item 5. Operating and Financial Review and Prospects-B. Liquidity and Capital Resources-Holding Company Structure.”

Under PRC laws and regulations, our PRC subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks designated by the State Administration of Foreign Exchange, or SAFE. The amounts restricted include the paid-up capital and the statutory reserve funds of our PRC subsidiaries, totaling $148,301 thousand, $170,956 thousand and $148,202 thousand as of December 31, 2023, 2022 and 2021, respectively.

Furthermore, cash transfers from our PRC subsidiaries to entities outside of China are subject to PRC government controls on currency conversion. To the extent cash in our business is in the PRC or a PRC entity, such cash may not be available to fund operations or for other use outside of the PRC due to restrictions and limitations imposed by the governmental authorities on the ability of us or our PRC subsidiaries to transfer cash outside of the PRC. Shortages in the availability of foreign currency may temporarily delay the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. In view of the foregoing, to the extent cash in our business is held in China or by a PRC entity, such cash may not be available to fund operations or for other use outside of the PRC. For risk related to the fund flows of our operations in China, see “Item 3. Key Information-D. Risk Factors-Risks Related to Doing Business in China- To the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies” and “- PRC regulation on loans to, and direct investment in, our PRC subsidiary by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of the Business Combination to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”

Under PRC law, we may provide funding to our PRC subsidiaries only through capital contributions or loans, subject to satisfaction of applicable government registration and approval requirements. For the fiscal years ended December 31, 2023, 2022, and 2021, we provided funding to our PRC subsidiaries of $7,150 thousand, nil and nil, respectively.

In addition, funds are transferred among our PRC subsidiaries for working capital purposes, primarily between Shandong Baoya, our main operating subsidiary and its subsidiaries. The following table provides a summary of the distributions and working capital funds transferred between Shandong Baoya and its subsidiaries:

The transfer of funds among companies are subject to the Provisions of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases (2021 Revision, the “Provisions on Private Lending Cases”), which was implemented on January 1, 2021 to regulate the financing activities between natural persons, legal persons and unincorporated organizations. The Provisions on Private Lending Cases set forth that private lending contracts will be upheld as invalid under the circumstance that (i) the lender swindles loans from financial institutions for relending; (ii) the lender relends the funds obtained by means of a loan from another profit-making legal person, raising funds from its employees, illegally taking deposits from the public; (iii) the lender who has not obtained the lending qualification according to the law lends money to any unspecified object of the society for the purpose of making profits; (iv) the lender lends funds to a borrower when the lender knows or should have known that the borrower intended to use the borrowed funds for illegal or criminal purposes; (v) the lending is in violations of mandatory provisions of laws or administrative regulations or (vi) the lending is in violations of public orders or good morals. The aforementioned circumstances do not exist in our PRC subsidiaries’ operations. As advised by our PRC counsel, Han Kun Law Offices, the Provisions on Private Lending Cases does not prohibit using cash generated from one subsidiary to fund another subsidiary’s operations. We have not been notified of any other restriction which could limit our PRC subsidiaries’ ability to transfer cash between subsidiaries. See*“Item 4. Information on the Company - B. Business Overview - Regulation - Regulations Relating to Private Lending.”*

Our wholly owned subsidiary, Chijet Inc., has maintained cash management policies which dictate the purpose, amount and procedure of cash transfers between Chijet Inc. and its wholly-owned and holding subsidiaries. Cash transfers within Chijet Inc. and its subsidiaries are subject to approval thresholds: transfers below RMB 5 million (approximately US$780,000) require review by the initiating entity’s financial department, those between RMB 5 million and RMB 20 million (approximately US$3.12 million) mandate CEO and CFO approval, and transfers exceeding RMB 20 million (approximately US$3.12 million) require board approval. Matters not addressed by these regulations are governed by relevant laws and regulations.

3.A. [Reserved]

3.B. Capitalization and Indebtedness

3.C. Reasons for the Offer and Use of Proceeds

3.D. Risk Factors

Investing in our ordinary shares is highly speculative and involves a significant degree of risk. You should carefully consider the following risks as well as all other information contained in this annual report, including the matters discussed under the headings “Forward-Looking Statements” and “Item 5. Operating and Financial Review and Prospects” before you decide to make an investment in our ordinary shares. Chijet Motor is a holding company with substantial all of its operations in China and is subject to a legal and regulatory environment that in many respects differs from the United States. The risks discussed below could materially and adversely affect our business, prospects, financial condition, results of operations, cash flows, ability to pay dividends and the trading price of our ordinary shares. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business, prospects, financial condition, results of operations, cash flows and ability to pay dividends, and you may lose all or part of your investment.

Such risks are not exhaustive. We may face additional risks that are presently unknown to us or that we believe to be immaterial as of the date of this annual report. Known and unknown risks and uncertainties may significantly impact and impair our business operations through our subsidiaries in China.

RISK FACTORS SUMMARY

Our business is subject to numerous risks described in the section titled “Risk Factors” and elsewhere in this annual report. The main risks set forth below and others you should consider are discussed more fully in the section entitled “Risk Factors”, which you should read in its entirety.

Risk Related to Our Business and Industry

Risks and uncertainties related to our business and industry include, but are not limited to, the following:

Risks Related to Cybersecurity and Data Privacy

Risks Related to Our Employees and Human Resources

Risks Related to Litigation and Regulations

Risks Related to Intellectual Property

Risks Related to Financing and Strategic Transactions

Risks Related to Doing Business in China

Risks Related to Ownership of Chijet Motor Ordinary Shares

In addition to the risks and uncertainties described above, we are subject to risk related to ordinary shares, including, but not limited to, the following:

RISK FACTORS

An investment in our Ordinary Shares involves significant risks. You should carefully consider all of the information in this annual report, including the risks and uncertainties described below, before making an investment in our Ordinary Shares. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our Ordinary Shares could decline, and you may lose all or part of your investment.

The risks set out below are not exhaustive and do not comprise all of the risks associated with an investment in Chijet Motor. Additional risks and uncertainties not currently known to Chijet Motor or which Chijet Motor currently deems immaterial may also have a material adverse effect on Chijet Motor’s business, financial condition, results of operations, prospects and/or its share price.

Risk Related to Our Business and Industry

Our business model and technology have yet to be operated in a commercial setting and any failure to commercialize our strategic plans would have an adverse effect on our operating results and business, harm our reputation and could result in substantial liabilities that exceed our resources.

Investors should be aware of the difficulties normally encountered by a new enterprise, many of which are beyond our control, including substantial risks and expenses in the course of developing new, unproven technology, establishing or entering new markets, organizing operations and undertaking marketing activities. Our financial performance depends, in part, on our ability to design, develop, manufacture, assemble, test, commercialize, market and support our vehicles on a timely and cost-effective basis.

We plan to commercialize electric commercial vehicles for production and sales currently and will commercialize a large number of electric passenger cars in 2024. Reference to “commercialize” or “commercialization” in this context means that we have currently finalized the vehicle and prepared for the mass production. A SOP (“Start of Production”) refers to the last stage (or node) for which a new model can be marketed and sold, and means all our R&D phase is generally finished so that the whole vehicle can be mass-produced on the production line. We have currently finalized the SOP for manufacturing electric commercial vehicles. We similarly anticipate the completion of the SOP for electric passenger cars in 2024.

Our plan to reach the SOP stage for some electric passenger cars in 2024 means, for purposes of the large number, that electric passenger cars have entered the batch production category in internal manufacturing of “MP (Mass Production),” which is larger than the earlier manufacturing categories of engineering sample, pre-production or pilot production. As a practical matter, we currently anticipate that our FB77 electric vehicle is expected to be launched during November 2024, and it is expected that 17,000 units of FB77 will be sold in China in 2025.

Following the commencement of production of electric vehicles, we may reduce the production of conventional fuel vehicles. Our principal focus has been on research and development activities to improve our technology and make our vehicles attractive to potential customers. We have begun construction of our first electric vehicle manufacturing site for pure electric vehicles only, having started construction in the second half of 2022. Our electric vehicle manufacturing site in Yantai is expected to have its assembly workshop for electric vehicles completed in October 2024. Our production site in Jilin is currently in normal production status, focusing on conventional vehicles.

These activities are subject to various risks and uncertainties that we are not able to control, including changes in customer demand, competing energy prices or industry standards, and the introduction of new or superior technologies by others. Moreover, any failure by us in the future to develop new technologies or to timely react to changes in existing technologies could materially delay our development of new solutions, which could result in technology obsolescence, decreased revenues, and a loss of our market share to our competitors. In addition, solutions or technologies developed by others may render our solutions or technologies obsolete or non-competitive. Further, if our solutions are not in compliance with prevailing industry standards, such non-compliance could materially and adversely affect our financial condition, cash flows, and results of operations.

The likelihood of our success must be considered in light of these risks, expenses, complications, delays, and the competitive environment in which we operate. There is, therefore, nothing at this time upon which to base an assumption that our business plan will prove successful, or that our technology will work as intended or be scalable, and we may not be able to generate revenue, raise additional capital, or operate profitably. We will continue to encounter risks and difficulties frequently experienced by early commercial stage companies, including scaling up our infrastructure and headcount, and we may encounter unforeseen expenses, difficulties, or delays in connection with our growth. In addition, as a result of the capital-intensive nature of our business, we expect to continue to sustain substantial operating expenses without generating sufficient revenues to cover expenditures. Any investment in us is therefore highly speculative and could result in the loss of your entire investment.

We have a history of operating losses and expect to incur significant additional expenses and operating losses.

We are an early-stage company, have a history of operating losses and negative operating cash flows. We incurred a net loss of $98,501 thousand, $111,518 thousand, and $62,552 thousand for the years ended December 31, 2023, 2022, and 2021, respectively. We expect that we will continue to incur operating and net losses for the medium term. The amount of future losses and when, if ever, we will achieve profitability are uncertain. In addition, even if we achieve profitability, there can be no assurance that we will be able to maintain profitability in the future. Our potential profitability is particularly dependent upon the penetration and growth of the market for our vehicles, parts, and technology, including solid-state batteries, in-wheel motors, and intelligent driving solutions, which may not occur at the levels we currently anticipate or at all.

Although the COVID-19 pandemic has affected our business and operations, those risks may be diminishing.

The COVID-19 pandemic has also periodically disrupted the manufacturing operations of vehicle manufacturers and their suppliers, including us. The COVID-19 pandemic poses risks included its impact on general economic conditions; manufacturing and supply chain operations; stay-at-home orders; and local and global financial markets. Any such disruptions to us or to our suppliers could result in delays and could negatively affect our production volume.

Please also see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” for more information. In addition, the COVID-19 pandemic has resulted in volatility in some global financial markets, which could increase our cost of capital or limit our ability to access financing when needed. Broader impacts of the pandemic also include inflationary pressure, which impacts the cost at which we can manufacture vehicles. The magnitude and duration of the COVID-19 pandemic and its economic and regulatory consequences are rapidly changing and uncertain. If the COVID-19 variants outbreak resurges, it could materially and adversely impact our business, financial condition, and results of operations.

Our failure to secure new contracts may adversely affect our business operations and financial results.

Our business depends in large part on our ability to secure contracts with customers. Contract proposals and negotiations are complex and frequently involve a lengthy negotiation and selection process, which is affected by a number of factors. These factors include market conditions, demonstrating to potential customers that our solutions can work for them, financing arrangements, and any required governmental approvals. If negative market conditions arise, and we cannot sell our vehicles, or if we fail to secure adequate financial arrangements or any required government approvals, we may not be able to pursue particular projects, which could adversely affect our ability to generate revenue. If we fail to complete a project in a timely manner, miss a required performance standard, or otherwise fail to adequately perform on a project, then we may incur a loss on that project, which may result in increased losses.

Our engagements will involve complex projects. The quality of our performance on such projects depends in large part upon our ability to manage the relationship with our clients and our ability to effectively manage the project and deploy appropriate resources, including third-party contractors and our own personnel, in a timely manner. If a project is not completed by the scheduled date or fails to meet required performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to rectify damages due to late completion or failure to achieve the required performance standards. The performance of projects can be affected by a number of factors, including unavoidable delays from suppliers and subcontractors, government inaction, public opposition, inability to obtain financing, weather conditions, unavailability of vendor materials, changes in the project scope of services requested by our clients, industrial accidents, environmental hazards, and labor disruptions. To the extent these events occur, the total costs of the project could exceed our estimates and we could incur a loss on a project, which would have an adverse effect on our business, results of operations, and financial condition. Further, any defects or errors, or failures to meet our clients’ expectations, could result in claims for damages against us.

If we are not able to successfully manage its growth strategy, our business operations and financial results may be adversely affected.

Our expected future growth presents numerous managerial, administrative, and operational challenges. Our ability to manage the growth of our operations will require us to continue to develop and improve our management information systems and our other internal systems and controls. In addition, our growth will increase our need to attract, develop, motivate, and retain both our management and employees. The inability of our management to effectively manage our growth or the inability of our employees to achieve anticipated performance could have a material adverse effect on our business.

The unavailability, reduction or elimination of government and economic incentives and other legislative or regulatory actions relating to renewable energy could have a material adverse effect on our business, prospects, financial condition and operating results.

Any reduction, elimination, or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of vehicles with carbon-free fuel solutions, or other reasons may result in the diminished competitiveness of the renewable energy industry generally or our vehicles. This could also materially and adversely affect the growth of the renewable energy markets and our business, prospects, financial condition, and operating results.

While we may seek to use certain tax credits and other incentives for electric vehicles, there is no guarantee these programs will be available in the future, or that we will be able to use them. If current tax incentives are not available in the future, our financial position could be harmed.

We may face significant challenges in securing on acceptable terms for a substantial part of the government grants, loans, and other incentives for which we apply. We have not been, and may continue to be, unable to convert any existing loans into government grants and subsidies we have applied for. We have failed to meet certain conditions of our existing loans and may not be able to meet the conditions of other loans. This poses a material risk to our financial stability and may materially and adversely impact our business, financial results and future prospects.

Our ability to obtain funds or incentives from government sources is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs. The application process for these funds and other incentives will likely be highly competitive. We cannot assure you that we will be successful in obtaining any of these additional grants, loans, and other incentives. If we are not successful in obtaining any of these additional incentives and we are unable to find alternative sources of funding to meet our planned capital needs, our business and prospects for certain projects could be materially adversely affected.

In May 2016, we secured two interest-free loans from non-financial institutions specifically for developing the Electric Vehicle industry in Xiangyang, PRC. The loans’ utilization was strictly limited to this purpose, with their maturity depending on the development’s progress. However, due to the COVID-19 pandemic and subsequent regulations, we were unable to meet the loan conditions or secure government subsidies to repay the loans by July 2022. Consequently, the loans were reclassified as current liabilities for the years 2021, 2022, and 2023, and we incurred a penalty of US$737 thousand (RMB5,232 thousand) for defaulting, which is 5% of the land use rights cost. The lender also reserved rights to demand compensation for losses, repurchase the land, and require repayment of any related government subsidies. As of April 30, 2024, no subsidies had been received. The principal amounts outstanding were approximately US$97,832 thousand (RMB 694,598 thousand) and US$100,697 thousand (RMB 694,598 thousand), respectively, as of December 31, 2023, and December 31, 2022. The variance primarily resulted from currency exchange rate fluctuations.

We are negotiating with the lender to extend the loan terms and are planning to expand production to fulfill the loan conditions. During the period ended December 31, 2023, we were unable to meet the conditions to apply for the government subsidies to repay the loans. As a result, in June 2023, the Company signed two pledge agreements with the lender. Pursuant to the pledge agreements, the Company pledged machinery and equipment, mold and tooling with a carrying amount of approximately US$12,766 thousand (RMB90,638 thousand), buildings with a carrying amount of approximately US$15,815 thousand (RMB11,282 thousand) and land use rights with a carrying amount of US$14,406 thousand (RMB102,280 thousand) to the government to secure the repayment of the principal and related interest on the aforementioned loans. See Note 17 of Notes to Consolidated Financial Statements, which are included in this annual report, for more details of the loan agreements.

Additionally, in December 2019, Shandong Baoya entered into loan agreements with Yantai Guofeng Investment Holding Group Co., Ltd. The loans bear an annual interest rate of 6.5%. Pursuant to the loan agreements, if Shandong Baoya met certain development conditions, part of the loan could be waived and converted to a government subsidy, including interest on such portion. For the year ended December 31, 2023, no principal amount has been converted to government subsidies. As of December 31, 2023, the outstanding principals were US$104,227 thousand. As of April 30, 2024, the outstanding principals and interests were US$133,794 thousand (RMB949,927 thousand).

We are in breach of certain loan agreements and may become in breach of other loan agreements in the future. If lendersenforce the pledge on certain of our properties, our business operation may be disrupted, and our business, financial condition, results of operations and prospects could be materially and adversely affected.

We obtained loans from certain related parties and other institutions to fund our business operations. FAW Jilin, China FAW Corporation Limited (the minority shareholder of FAW Jilin) and its affiliate, FAW Finance Co., Ltd have entered into a series of working capital loan agreements in the amount of RMB700 million (approximately US$98,593 thousand) on January 29, 2019, in the amount of RMB350 million (approximately US$49,296 thousand) on May 20, 2019, in the amount of RMB150 million (approximately US$21,127 thousand) on August 29, 2019, in the amount of approximately RMB270 million (approximately US$38,029) on October 29, 2019, in the amount of approximately RMB188 million (approximately US$26,479 thousand) on November 27, 2019, in the amount of approximately RMB87.4 million (approximately US$12,310 thousand) on December 13, 2019, each of the loans bears an annual interest rate of 3.915% with a term of one year. On January 23, 2020, the loan in the amount of RMB 700 million was extended for 12 months. On May 20, 2020, the parties have entered into a supplement agreement to the loan agreements, pursuant to which, FAW Jilin agreed to make four installment payments of US$41,732,628 (RMB 287,867,500), each for the remaining principal balance and pledged certain land use rights, buildings, machinery and equipment, mold and tooling and other logistic equipment of FAW Jilin. FAW Jilin failed to make the payments on November 1, 2022 and November 1, 2023. As of April 30, 2024, the aggregate outstanding principals and interests under such loans were US$185,746 thousand (RMB1,318,779 thousand). See “Item 7. Major Shareholders and Related Party Transactions” and “Item 13. Defaults, Dividend Arrearages and Delinquencies” for more details and current status of the loan agreements. If FAW Finance Co., Ltd. enforces the pledge, we will be unable to continue the use of such land, buildings, machinery and equipment, and our business operation may be disrupted. We may be forced to suspend manufacturing or look for alternative manufacturing facilities, which could be time-consuming, and the alternative facilities may not be available at commercially acceptable terms, or at all. Consequently, our business, financial condition, results of operations and prospects could be materially and adversely affected.

In May 2016, we secured two interest-free loans from non-financial institutions specifically for developing the Electric Vehicle industry in Xiangyang, PRC. The loans’ utilization was strictly limited to this purpose, with their maturity depending on the development’s progress. However, due to the COVID-19 pandemic and subsequent regulations, we were unable to meet the loan conditions or secure government subsidies to repay the loans by July 2022. Consequently, the loans were reclassified as current liabilities for the years 2021, 2022, and 2023, and we incurred a penalty of US$737 thousand (RMB5,232 thousand) for defaulting, which is 5% of the land use rights cost. The lender also reserved rights to demand compensation for losses, repurchase the land, and require repayment of any related government subsidies. As of April 30, 2024, no subsidies had been received. The principal amounts outstanding were approximately US$97,832 thousand (RMB 694,598 thousand) and US$100,697 thousand (RMB 694,598 thousand), respectively, as of December 31, 2023, and December 31, 2022. The variance primarily resulted from currency exchange rate fluctuations.

We are negotiating with the lender to extend the loan terms and are planning to expand production to fulfill the loan conditions. During the period ended December 31, 2023, we were unable to meet the conditions to apply for the government subsidies to repay the loans. As a result, in June 2023, the Company signed two pledge agreements with the lender. Pursuant to the pledge agreements, the Company pledged machinery and equipment, mold and tooling with a carrying amount of approximately US$12,766 thousand (RMB90,638 thousand), buildings with a carrying amount of approximately US$15,815 thousand (RMB11,282 thousand) and land use rights with a carrying amount of US$14,406 thousand (RMB102,280 thousand) to the government to secure the repayment of the principal and related interest on the aforementioned loans. See Note 17 of Notes to Consolidated Financial Statements, which are included in this annual report, for more details of the loan agreements. If the lenders enforce the pledge, we will be unable to continue the use of such land, buildings, machinery and equipment, and our business operation may be disrupted. We may be forced to suspend manufacturing or look for alternative manufacturing facilities, which could be time-consuming, and the alternative facilities may not be available at commercially acceptable terms, or at all. Consequently, our business, financial condition, results of operations and prospects could be materially and adversely affected.

An increase in the prices of materials used in our business could adversely affect our business.

Because we are vehicle manufacturers, we are exposed to market risk of increases in certain commodity prices of materials, such as nickel, steel, concrete, and adhesives, which are used as components of supplies or materials utilized in our operations. In particular, raw material costs have been extremely volatile during the pandemic, in some cases increasing by 30% to 100%. These prices could be materially impacted by general market conditions and other factors. Our prices with current customers are determined by the sale of our vehicles and there is limited ability for prices to be adjusted for price increases in materials, and while we believe we may be able to increase our prices under future sales to account for some price increases in materials, there can be no assurance that price increases of materials, if they were to occur, would be recoverable.

We may be unable to complete or operate our projects on a profitable basis or as we have committed to our customers.

Design and manufacturing of our vehicles, and maintenance support for those vehicles, entails many risks, including:

Any of these factors could give rise to installation delays and installation and other costs in excess of our expectations. This could prevent us from completing installation of our projects, cause defaults under any then-existing financing agreements or under contracts that require completion of project installation by a certain time, cause projects to be unprofitable for us, or otherwise impair our business, financial condition and operating results.

Operation of our business in international markets may expose us to additional risks, which could have an adverse effect on our operating results.

Some of our current customer contracts are for the sale of our vehicles outside of China, and we expect to generate a portion of our revenues from operations outside of China in the future. Operations in international markets may require us to respond to new and unanticipated regulatory, marketing, sales, and other challenges. These efforts may be time-consuming and costly, and there can be no assurance that we will be successful in responding to these and other challenges we may face as we operate in international markets, including:

Our international operations are also subject to general geopolitical risks, such as political, social, and economic instability, war, civil unrest, sabotage, kidnapping and ransom, expropriation, incidents of terrorism, changes in diplomatic and trade relations, or responses to such events. One or more of these factors could adversely affect any of our international operations and result in lower revenue and/or greater operating expenses than we expect, and could significantly affect our results of operations and financial condition.

Our overall success in international markets will depend, in part, on our ability to succeed in differing legal, regulatory, economic, social, and political conditions. We may not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each country where we do business. Our failure to manage these risks successfully could harm our international operations, reduce our international sales, and increase our costs, thus adversely affecting our business, financial condition, and operating results.

Our revenue, expenses, and operating results may fluctuate significantly.

Our revenue, expenses, and operating results may fluctuate significantly because of numerous factors, some of which may contribute to more pronounced fluctuations in an uncertain global economic environment. In addition to the other risks described in this “Risk Factors” section, the following factors could cause our operating results to fluctuate:

As a consequence, operating results for any future periods are difficult to predict and, therefore, prior results are not necessarily indicative of results to be expected in future periods. Any of the foregoing factors, or any other factors discussed elsewhere herein, could have a material adverse effect on our business, results of operations, and financial condition that could adversely affect the price of our Ordinary Shares.

Failure of third parties to manufacture quality products or provide reliable services in a timely manner could cause delays in the delivery of our services and completion of our projects, which could damage our reputation, have a negative impact on our relationships with our customers and adversely affect our growth.

Our success depends on our ability to provide services and complete projects in a timely manner, which in part depends on the ability of third parties to provide us with timely and reliable products and services. In designing and manufacturing our vehicles, we rely on components that meet our design specifications and components manufactured and supplied by third parties, as well as on services performed by subcontractors.

We will also rely on subcontractors to perform substantially all of the installation work related to our projects; and we may need to engage subcontractors with whom we have no experience for our projects.

If any of our subcontractors are unable to provide services that meet our customers’ expectations or satisfy our contractual commitments, our reputation, business, and operating results could be harmed. In addition, if we are unable to avail ourselves of warranty and other contractual protections with providers of products and services, we may incur liability to our customers or additional costs related to the affected products and components, which could have a material adverse effect on our business, financial condition, and operating results. Moreover, any delays, malfunctions, inefficiencies, or interruptions in these products or services could adversely affect the quality and performance of our solutions and require considerable expense to establish alternate sources for such products and services. This could cause us to experience difficulty retaining current customers and attracting new customers, and could harm our brand, reputation, and growth.

Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate.

Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. This is especially so at the present time due to the uncertain and rapidly changing expectations regarding the severity, magnitude, and duration of the COVID-19 pandemic. The estimates and forecasts we include in this annual report relating to the size and expected growth of our target market and market demand may also prove to be inaccurate. The estimated global addressable market is based on assumptions that may prove to be inaccurate or incorrect. In addition, the estimated global market may not materialize in the timeframe we expect, if ever, and even if the markets meet the estimates presented in this annual report, this should not be taken as indicative of our future growth or prospects. In order to be successful, we will need to prove our ability to commercialize and scale our technology, successfully secure substantial customer contracts, obtain sufficient capital to finance our business, including construction of our vehicles, and otherwise successfully scale our business and operations. We face a number of challenges in achieving our objectives, including those described elsewhere in these risk factors, and these challenges are significant. There can be no assurance that we will be able to achieve our objectives or successfully grow our business, capture meaningful market share, or take advantage of market opportunities.

Our business will depend on experienced and skilled personnel and third-party engineering subcontractor resources, and if we lose key personnel or if we are unable to attract and integrate additional skilled personnel, it will be more difficult for us to manage our business and complete projects.

The success of our business and installation of projects will depend in large part on the skill of our personnel and on trade labor resources. Competition for personnel, particularly those with expertise in the energy services and renewable energy industries, is high. In the event we are unable to attract, hire, and retain the requisite personnel and subcontractors, we may experience delays in completing projects in accordance with project schedules and budgets.

Further, any increase in demand for personnel may result in higher costs, causing us to exceed the budget on a project. Either of these circumstances may have an adverse effect on our business, financial condition, and operating results, harm our reputation among and relationships with our customers, and cause us to curtail our pursuit of new projects.

Our future success is particularly dependent on the vision, skills, experience, and effort of our senior management team, including our executive officers and our founder, director, and chief executive officer, Mu Hongwei. If we were to lose the services of any of our executive officers or key employees, our ability to effectively manage our operations and implement our strategy could be harmed and our business may suffer.

We expect to operate in a highly competitive industry, and our current or future competitors may be able to compete more effectively than we do, which could have a material adverse effect on our business, revenues, growth rates, and market share.

The markets and industries in which we expect to compete are highly competitive, with many companies of varying size and business models, many of which have their own proprietary technologies, competing for the same business as we do. Many of our competitors have longer operating histories and greater resources than we do and could focus their substantial financial resources to develop a competitive advantage. Our competitors may also offer vehicles with carbon-free fuel solutions at prices below cost, devote significant sales resources to competing with us, or attempt to recruit our key personnel by increasing compensation, any of which could improve these competitors’ competitive positions. Additionally, we expect competition to intensify in the future as existing competitors and new market entrants introduce new solutions into our markets. Any of these competitive factors could make it more difficult for us to attract and retain customers, increase our sales and marketing expenses, reduce profit margins, cause us to lower our prices in order to compete, and reduce our market share and revenues, any of which could have a material adverse effect on our financial condition and operating results. We can provide no assurance that we will continue to effectively compete against our current competitors or additional companies that may enter our markets.

In addition, we may also face competition based on technological developments that compete with our vehicles. Our competitors may develop technology that would make our technology noncompetitive or obsolete. If we do not keep pace with product and technology advances and otherwise keep our solutions competitive, there could be a material adverse effect on our competitive position, revenue, and prospects for growth. Some of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages such as:

Some of our expected larger competitors may have substantially broader product offerings and may be able to leverage their relationships with partners and customers based on other products to gain business in a manner that discourages potential customers from purchasing our vehicles, including by selling at zero or negative margins or product bundling. In addition, innovative start-up companies, and larger companies that are making significant investments in research and development, may invent similar or superior technologies that compete with our technology. Our current and potential competitors may also establish cooperative relationships among themselves or with third parties that may further enhance their resources. If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, financial condition, and results of operations could be adversely affected.

We expect that our business will benefit in part from government support for new energy vehicles and electric vehicles, and a decline in such support could harm our business.

We expect to benefit in part from legislation and government policies that support renewable energy, and projects that support vehicles that operate through renewable or electric energy. This support may include legislation and regulations that encourage or in some cases require our customers to procure power from renewable or low-emission sources or otherwise to procure our solutions; and provide us or our customers with tax and other incentives that reduce our costs or increase our revenues. The government of China supports the EV industry through vehicle purchase tax reduction and subsidy of which relating tax reduction and exemption policy has been extended to December 31, 2027. We cannot be certain that such tax reduction and exemption policy will not be discontinued or changed. Without this support, our ability to obtain project commitments could be adversely affected.

An inability to protect our intellectual property could negatively affect our ability to compete, our business, and our results of operations. Our ability to compete effectively depends in part upon the maintenance and protection of the intellectual property related to our vehicles. As of the date of this annual report, we hold a portfolio of 110 granted patents, including 3 invention patents, 76 utility model patents, 31 appearance patents, 13 pending patents and 48 granted trademarks. We might not succeed in obtaining patents from any of our pending applications. Even if we are awarded patents, they may not provide any meaningful protection or commercial advantage to us, as they may not be of sufficient scope or strength or may not be issued in all countries where our vehicles can be sold. Patent protection is unavailable for certain aspects of the technology and operational processes that are important to our business. Any patent held by us or to be issued to us, or any of our pending patent applications, could be challenged, invalidated, deemed unenforceable, or circumvented. In addition, our competitors may be able to design around our patents. To date, we have relied principally on patent, copyright, trademark, and trade secret laws, as well as confidentiality and proprietary information agreements and licensing arrangements, to establish and protect our intellectual property. While we have obtained confidentiality and proprietary information agreements from our targeted customers, vendors, and all of our employees, we cannot be certain that these agreements will be honored. Policing unauthorized use of our intellectual property is difficult and expensive, as is enforcing our rights against unauthorized use.

The steps that we have taken or may take may not prevent misappropriation of the intellectual property on which we rely. In addition, effective protection may be unavailable or limited in jurisdictions outside the United States, as the intellectual property laws of foreign countries sometimes offer less protection or have onerous filing requirements. From time to time, third parties may infringe our intellectual property rights. Litigation may be necessary to enforce or protect our rights or to determine the validity and scope of the rights of others. Any litigation could be unsuccessful, cause us to incur substantial costs, divert resources away from our daily operations, and result in the impairment of our intellectual property. Failure to adequately enforce our rights could cause us to lose rights in our intellectual property and may negatively affect our business.

In addition to patent protection, we rely significantly upon trade secret laws to protect our proprietary technologies. The confidentiality and proprietary information agreements may not be adequate to prevent misappropriation of our technologies or to assure that our competitors will not independently develop technologies that are substantially equivalent or superior to our technologies. In addition, the laws of other countries in which we operate may not protect our proprietary rights to the same extent as the laws of the United States. We are also subject to the risk of adverse claims and litigation alleging infringement of intellectual property rights.

Our patent applications may not issue as patents, which may have a material adverse effect on our ability to prevent others from commercially exploiting solutions similar to ours.

We cannot be certain that we are the first inventor of the subject matter to which we have filed a particular patent application, or if we are the first party to file such a patent application. If another party has filed a patent application to the same subject matter as we have, we may not be entitled to the protection sought by the patent application. Further, the scope of protection of issued patent claims is often difficult to determine. As a result, we cannot be certain that the patent applications that we file will issue, or that our issued patents will afford protection against competitors with similar technology. In addition, our competitors may design around our issued patents, which may adversely affect our business, prospects, financial condition, or operating results.

Certain of our facilities are or may be located in regions that may be affected by extreme weather conditions and natural disasters.

Our business is headquartered in No. 8, Beijing South Road Economic & Technological Development Zone Yantai, Shandong, P.R.China, and our production plants are in Yantai base-No. 8, Beijing South Road Economic & Technological Development Zone Yantai, Shandong, P.R.China; Jilin base-2888 Dongshan Street, Gaoxin Automobile Industrial Park, Jilin City, Jilin, P.R.China. Historically, our Yantai base, in the middle and east of China, suffered from natural disasters rarely, but our Jilin base, in the northeast of China, lasted nearly half a year in winter, which brought possible natural disasters. Although we intend to maintain loss insurance where necessary, a hurricane or other natural disaster could result in significant damage to our facilities, destruction or disruption of our critical business or information technology systems, recovery costs, and interruption to certain of our operations. In addition, catastrophic events could interrupt operations of our customers and suppliers, which could result in delays or cancellation of customer orders, the loss of customers, harm to or destruction of our vehicles on customer premises, and impediments to the manufacture or shipment of products or execution of projects, which could result in loss of business or an increase in expense, both of which may have a material adverse effect on our business. Moreover, we expect to have facilities in international markets and our current customer sites are located in international markets, which may be subject to weather-related risks, natural disasters, or other risks.

We may be impacted by weather extremes, earthquakes, drought, floods, and wildfire, which may cause temporary, short-term anomalies in our operational performance in certain localized geographic regions. Delays and other weather impacts could adversely affect our ability to meet project deadlines and may increase a project’s cost and decrease its profitability.

Computer malware, viruses, ransomware, hacking, phishing attacks and other network disruptions could result in security and privacy breaches, loss of proprietary information and interruption in service, which would our business.

Computer malware, viruses, physical or electronic break-ins, and similar disruptions could lead to interruption and delays in our services and operations and loss, misuse, or theft of data. Computer malware, viruses, ransomware, hacking, phishing attacks, or denial of service against online networks have become more prevalent and may occur on our systems. Any attempts by cyber attackers to disrupt our services or systems, if successful, could harm our business, introduce liability to data subjects, result in the misappropriation of funds, be expensive to remedy, and damage our reputation or brand. Insurance may not be sufficient to cover significant expenses and losses related to cyber-attacks. Notwithstanding the security measures we have implemented, such as managed security services, that are designed to detect and protect against cyber-attacks, and any additional measures we may implement or adopt in the future, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, computer viruses, lost or misplaced data, programming errors, scams, burglary, human errors, acts of vandalism, or other events. Efforts to prevent cyber attackers from entering computer systems are expensive to implement, and we may not be able to cause the implementation or enforcement of such preventions with respect to our third-party vendors. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security, and availability of systems and technical infrastructure may, in addition to other losses, harm our reputation, brand, and ability to attract customers.

There are several factors ranging from human error to data corruption that could materially impact the efficacy of any processes and procedures designed to enable us to recover from a disaster or catastrophe, including by lengthening the time services are partially or fully unavailable to customers and users. It may be difficult or impossible to perform some or all recovery steps and continue normal business operations due to the nature of a particular cyber-attack, disaster, or catastrophe or other disruption, especially during peak periods, which could cause additional reputational damages or loss of revenues, any of which would adversely affect our business and financial results.

We are or may be subject to risks associated with strategic alliances or acquisitions.

We have entered into, and may in the future enter into additional, strategic alliances, including joint ventures or minority equity investments with various third parties to further our business purpose. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party, and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

When appropriate opportunities arise, we may acquire additional assets, products, technologies, or businesses that are complementary to our existing business. In addition to possible shareholder approval, we may need approvals and licenses from relevant government authorities for the acquisitions and to comply with any applicable laws and regulations, which could result in increased delay and costs and may disrupt our business strategy if we fail to do so. Furthermore, acquisitions and the subsequent integration of new assets and businesses into our own assets and businesses require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our operations. Acquired assets or businesses may not generate the financial results we expect. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets, and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant.

We are subject to various environmental laws and regulations that could impose substantial costs upon us and cause delays in manufacture and sale of our vehicles.

Our operations may be subject to international, federal, state, and/or local environmental laws and regulations, including laws relating to the use, handling, storage, disposal, and human exposure to hazardous materials. Environmental and health and safety laws and regulations can be complex, and we expect that we will be affected by future amendments to such laws or other new environmental and health and safety laws and regulations which may require us to change our operations, potentially resulting in a material adverse effect on our business, prospects, financial condition, and operating results. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, and fines and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations may result in substantial fines and penalties, third party damages, suspension of production, or a cessation of our operations.

Our ability to produce vehicles and our future growth depend upon our ability to maintain relationships with our existing suppliers and strategic partners, to source new suppliers for our critical components, and to complete building out our supply chain while effectively managing the risks due to such relationships.

Our success will be dependent upon our ability to enter into new supplier agreements and maintain our relationships with suppliers and strategic partners who are critical and necessary to the output and production of our vehicles. We also rely on suppliers and our strategic partners to provide us with key components and technology for our vehicles. The supplier agreements we have or may enter into with key suppliers and our strategic partners in the future may have provisions where such agreements can be terminated in various circumstances, including potentially without cause. If these suppliers and strategic partners become unable to provide, or experience delays in providing components or technology, or if the supplier and the strategic agreements we have in place are terminated, it may be difficult to find replacement components and technology. Changes in business conditions, pandemics, governmental changes, and other factors beyond our control or that we do not presently anticipate could affect our ability to receive components or technology from our suppliers and strategic partners.

Furthermore, we have not secured supply agreements for all of our components, technology, and services. We may be at a disadvantage in negotiating supply agreements for the production of our vehicles. Additionally, there is the possibility that finalizing the supply agreements for the parts and components of our vehicles will cause significant disruption to our operations, or such supply agreements could be at costs that make it difficult for us to operate profitably.

If we do not enter into longer-term supplier agreements with guaranteed pricing for our parts or components, we may be exposed to fluctuations in prices of components, materials, and equipment. Agreements for the purchase of battery cells and other components contain or are likely to contain pricing provisions that are subject to adjustment based on changes in market prices of key commodities. Substantial increases in the prices for such components, materials, and equipment, whether due to supply chain or logistics issues or due to inflation, would increase our operating costs and could reduce our margins if we cannot recoup the increased costs. Any attempts to increase the announced or expected prices of our vehicles in response to increased costs could be viewed negatively by our customers or potential customers and could adversely affect our business, prospects, financial condition, or results of operations.

Our operations rely heavily on a variety of agreements with our strategic partners, including agreements related to research and development, purchasing, manufacturing engineering, and logistics. We may also come to rely on other original equipment manufacturers, vendors, and technology providers. The inability for us to maintain agreements or partnerships with our existing strategic partners or to enter into new agreements or partnerships could have a material and adverse effect on our ability to operate as a standalone business, produce vehicles, reach our development and production targets, or focus our efforts on our core areas of differentiation.

Our operations rely heavily on a variety of agreements, including agreements related to research and development, purchasing, manufacturing engineering, and logistics, with our strategic partners, including certain other original equipment manufacturers, vendors, and technology providers. Our reliance on these agreements subjects us to a number of significant risks, including the risk of being unable to operate as a standalone business, produce vehicles, reach our development and production targets, or focus our efforts on core areas of differentiation.

These partnerships permit us to benefit from the decades of experience of established technology and know-how in auto manufacturing while focusing our efforts on core areas of differentiation, such as design, performance, and rapid adoption of the latest technologies and sustainability solutions. We intend to continue to rely on these partnerships as part of our strategy. We intend to rely primarily on our arrangements with specified contract partners to manufacture future models. If we are unable to maintain agreements or partnerships with our existing strategic partners or to enter into new agreements or partnerships, our ability to operate as a standalone business, produce vehicles, reach our development and production targets, or focus our efforts on core areas of differentiation could be materially and adversely affected.

We are dependent on our strategic partners and suppliers, some of which are single-source suppliers, and the inability of these strategic partners and suppliers to deliver necessary components of our products on schedule and at prices, quality levels, and volumes acceptable to us, or our inability to efficiently manage these components, could have a material and adverse effect on our results of operations and financial condition.

We rely on our strategic partners and suppliers for the provision and development of the key components and materials used in our vehicles. While we plan to obtain components from multiple sources whenever possible, some components used in our vehicles will be purchased by us from a single source, and our limited, and in many cases single-source, supply chain exposes us to multiple potential sources of delivery failure or component shortages for our production. To date, supply chain disruptions excepting impacts from COVID-19 themselves have not significantly or even materially affected our outlook or business goals, because we seek alternative suppliers for all components in the manufacturing process. Even where there are key components such as batteries, we have three alternative suppliers to reduce the risk associated with a single supplier, although we may from time to time use primarily one or more suppliers. We also choose suppliers in different local country regions to minimize the risk of regional disruption.

However, it is possible that in the future our suppliers may not be able to meet our required product specifications and performance characteristics, which would impact our ability to achieve our product specifications and performance characteristics as well. Additionally, our suppliers may be unable to obtain required certifications or provide necessary warranties for their products that are necessary for use in our vehicles. We may also be impacted by changes in our supply chain or production needs, including cost increases from our suppliers, in order to meet our quality targets and development timelines as well as due to design changes. Likewise, any significant increases in our production may in the future require us to procure additional components in a short amount of time. Our suppliers may not ultimately be able to sustainably and timely meet our cost, quality, and volume needs, requiring us to replace them with other sources. If we are unable to obtain suitable components and materials used in our vehicles from our suppliers or if our suppliers decide to create or supply a competing product, our business could be adversely affected. Further, if we are unsuccessful in our efforts to control and reduce supplier costs, our results of operations will suffer. Other than related to COVID-19 quarantines and closures generally, we have not experienced any temporary supply chain disruption in the recent past, nor have our operations been affected by the relevant circumstances. Moreover, supply chain disruption risk prevention measures have been implemented as (i) alternative suppliers for all components, among which three suppliers have been selected for core key components such as batteries to prevent the risk of single-source supply. (ii). multiple suppliers in different regions to minimize the risk of regional disruption. (iii) the core key components such as batteries and chips as strategic partnerships or equity partnerships to effectively guarantee priority supply rights in case of market-based shortages.

In addition, we could experience delays if our strategic partners and suppliers do not meet agreed-upon timelines or experience capacity constraints. Any disruption in the supply of components, whether or not from a single-source supplier, could temporarily disrupt production of our vehicles until an alternative supplier is able to supply the required material, and there can be no guarantee that we or our strategic partners will be able to make up delays in production caused by any disruption in the supply of critical components. Even in cases where we may be able to establish alternate supply relationships and obtain or engineer replacement components for our single-source components, we may be unable to do so quickly, or at all, at prices or quality levels that are acceptable to us. This risk is heightened by the fact that we have less negotiating leverage with suppliers than larger and more established automobile manufacturers, which could adversely affect our ability to obtain necessary components and materials on favorable pricing and other terms, or at all. Any of the foregoing could materially and adversely affect our results of operations, financial condition, and prospects. (See “—Risks Related to Our Business and Industry — Increases in costs, disruption of supply, or shortage of materials, especially for lithium-ion cells or semiconductors, could harm our business. We will need to maintain and significantly grow our access to battery cells and control their related costs.”) Furthermore, as the scale of our vehicle production increases, we will need to accurately forecast, purchase, warehouse, and transport components internationally to manufacturing facilities and servicing locations and at much higher volumes. If we are unable to accurately match the timing and quantities of component purchases to our actual needs or successfully implement automation, inventory management, and other systems to accommodate the increased complexity in our supply chain, we may incur unexpected production disruption, storage, transportation, and write-off costs, which could have a material and adverse effect on our results of operations and financial condition.

In addition, if we develop an international manufacturing footprint, we will face additional challenges with respect to international supply chain management and logistics costs. If we are unable to access or develop localized supply chains in the regions where we or our partners already have or develop manufacturing facilities with the quality, costs, and capabilities required, we could be required to source components from distant suppliers, which would increase our logistics and manufacturing costs and increase the risk and complexity of our supply chain.

We may not be able to accurately estimate the supply and demand for our vehicles, which could result in inefficiencies in our business, hinder our ability to generate revenue, and create delays in the production of our vehicles. If we fail to accurately predict our manufacturing requirements, we incur the risk of having to pay for research and development costs as well as production capacities that we reserved but will not be able to use, or that we will not be able to secure sufficient additional production capacities at reasonable costs in case product demand exceeds expectations.

It is difficult to predict our future revenues and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business. We are required to provide forecasts of our demand to certain of our strategic partners and suppliers several months prior to the scheduled delivery of vehicles to our prospective customers. Currently, there is little historical basis for making judgments about the demand for our vehicles or our ability to develop, manufacture, and deliver vehicles, or our profitability in the future. If we overestimate our requirements, we may incur a higher cost of research and development of our models which will increase our cost of production, and our strategic partners or suppliers may have excess manufacturing capacity and/or inventory, which indirectly would increase our costs. If we underestimate our requirements, our strategic partners and suppliers may have inadequate manufacturing capacity and/or inventory, which could interrupt manufacturing of our products and result in delays in shipments and revenues. In addition, lead times for materials and components that our suppliers order may vary significantly and depend on factors such as the specific supplier, contract terms, and demand for each component at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of vehicles to our customers could be delayed, which would harm our brand, business, financial condition, and results of operations.

We may be unable to grow our global product sales, delivery capabilities, and our servicing and vehicle charging partnerships, or we may be unable to accurately project and effectively manage our growth. If we are unable to expand our distribution network and servicing capabilities, customers’ perceptions of us could be negatively affected, which could materially and adversely affect our business, financial condition, results of operations, and prospects.

Our success will depend on our ability to continue to expand our sales capabilities. As we develop and grow our products worldwide, our success will depend on our ability to correctly forecast demand in various markets. If we incorrectly forecast our demand in one market, we cannot move this excess supply to another market where demand for our products exists. We may face difficulties with deliveries at increasing volumes, particularly in international markets requiring significant transit times. Moreover, because of our unique expertise with our vehicles, we recommend that our vehicles be serviced by us or by certain authorized professionals. If we experience delays in adding servicing capacity or servicing our vehicles efficiently, or experience unforeseen issues with the reliability of our vehicles, it could overburden our servicing capabilities and parts inventory.

There is no assurance that we will be able to ramp our business to meet our sales, delivery, manufacturing, and servicing targets globally, or that our projections on which such targets are based will prove accurate. These plans require significant cash investments and management resources, and there is no guarantee that they will generate additional sales or manufacturing of our products, or that we will be able to avoid cost overruns or be able to hire additional personnel to support them. As we expand, we will also need to ensure our compliance with regulatory requirements in various jurisdictions applicable to the manufacturing, sale, and servicing of our products. If we fail to manage our growth effectively, our brand, business, prospects, financial condition, and operating results may be harmed.

We may in the future experience significant delays in the design, development, manufacture, launch, and financing of our vehicles, as well as delays in our constructions of factories, which could harm our business and prospects.

Any delay in the financing, development, design, manufacture, and launch of our vehicles, including planned future models, and any future electric vehicles could materially damage our business, prospects, financial condition, and results of operations. Automobile manufacturers often experience delays in the development, design, manufacture, and commercial release of new vehicle models, and we have experienced in the past, and may experience in the future, such delays with regard to our vehicles. Our plan to commercially manufacture and sell our vehicles is also dependent upon the timely availability of funds, upon our finalizing of the related development, component procurement, testing, build-out, and manufacturing plans in a timely manner and also upon our ability to execute these plans within the planned timeline. Prior to mass production of our new models, we will also need the vehicles to be fully approved for sale according to differing requirements, including but not limited to regulatory requirements, in the different geographies where we intend to launch our vehicles.

Additionally, if we do not timely complete our planned construction of additional factories, or if such construction is delayed, we may be required to contract with third-party providers to perform certain manufacturing activities and the additional cost could adversely affect our business and results of operations.

Increases in costs, disruption of supply, or shortage of materials, especially for lithium-ion cells or semiconductors, could harm our business. We will need to maintain and significantly grow our access to battery cells and control their related costs.

As we produce our vehicles, we may experience increases in the cost of or sustained interruption in the supply or shortage of materials. Any such increase, supply interruption, or shortage could materially and adversely impact our business, results of operations, prospects, and financial condition. The production of our vehicles requires lithium-ion cells and semiconductors from suppliers, as well as aluminum, steel, lithium, nickel, copper, cobalt, neodymium, terbium, praseodymium, and manganese. The prices for these materials fluctuate, and their available supply may be unstable, depending on market conditions, inflationary pressure, and global demand for these materials, including as a result of increased production of electric vehicles and energy storage products by our competitors, and could adversely affect our business and results of operations. Our ability to manufacture our vehicles will depend on the continued supply of battery cells for the battery packs used in our products.

We seek alternative suppliers for all components in the manufacturing process. Even where there are key components such as battery cells, we have several (three) alternative suppliers to reduce the risk associated with a single supplier, although we may from time to time use primarily one or more suppliers. We have limited flexibility otherwise in changing battery cell suppliers, and any disruption in the supply of battery cells from such suppliers could disrupt production of our vehicles until a different supplier is fully qualified. In particular, we are exposed to multiple risk related to lithium-ion cells. These risks include:

Furthermore, our ability to manufacture our vehicles depends on continuing access to semiconductors and components that incorporate semiconductors. A global semiconductor supply shortage is having wide-ranging effects across multiple industries and the automotive industry in particular, and it has impacted many automotive suppliers and manufacturers, including us, that incorporate semiconductors into the parts we supply or manufacture. Although we have not currently experienced (other than government-mandated lockdowns or quarantines relating to COVID-19) an impact on our operations as a result of the semiconductor supply shortage, such shortage could in the future have a material impact on us or our suppliers, which could delay production or force us or our suppliers to pay expensive or exorbitant rates for continued access to semiconductors and could have a material and adverse effect on our business, prospects, and results of operations. In addition, prices and transportation expenses for these materials fluctuate depending on many factors beyond our control, including fluctuations in supply and demand, currency fluctuations, tariffs and taxes, fluctuations and shortages in petroleum supply, freight charges, the ongoing COVID-19 pandemic, and other economic and political factors. Substantial increases in the prices for our materials or prices charged to us, such as those charged by battery cell or semiconductor suppliers, would increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased prices. Any attempt to increase product prices in response to increased material costs could result in cancellations of orders and reservations and materially and adversely affect our brand, image, business, results of operations, prospects, and financial condition.

The success and growth of our business depends upon our ability to continuously and rapidly innovate, develop, and market new products, and there are significant risks related to future market adoption of our products. Our limited operating history of NEVs makes evaluating our business and future prospects difficult and may increase the risk of your investment.

The success and growth of our business depends upon our ability to continuously and rapidly innovate, develop, and market new products, and there are significant risks related to future market adoption of our products and government programs incentivizing consumers to purchase electric vehicles. We have a limited operating history in NEVs and operate in a rapidly evolving and highly regulated market. We have encountered and expect to continue to encounter risks and uncertainties frequently experienced by early-stage companies in rapidly changing markets, including risk related to our ability to, among other things:

We operate in an intensely competitive market, which is generally cyclical and volatile. If we are not able to compete effectively against our competitors, we are likely to lose market share, which could have a material and adverse effect on our business, financial condition, results of operations, and prospects.

The global automotive market, particularly for NEVs, is highly competitive, and we expect it will become even more so in the future. In recent years, the electric vehicle industry has grown, with several companies that focus completely or partially on the electric vehicle market. We expect additional companies to enter this market within the next several years. We also compete with established automobile manufacturers in the vehicle segment, many of which have entered or have announced plans to enter the alternative fuel and electric vehicle market with either fully electric or plug-in hybrid versions of their vehicles. Many of our current and potential competitors have significantly greater financial, technical, manufacturing, marketing, and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution, promotion, sale, servicing, and support of their products. In addition, many of these companies have longer operating histories, greater name recognition, larger and more established research and development teams and sales forces, broader customer and industry relationships, and other resources than we do. Our competitors may be in a stronger position to respond quickly to new technologies and may be able to design, develop, market, and sell their products more effectively than we do. We expect competition in our industry to significantly intensify in the future in light of increased demand for new energy vehicles, continuing globalization, favorable governmental policies, and consolidation in the worldwide automotive industry. Our ability to successfully compete in our industry will be fundamental to our future success in existing and new markets. Further, sales of vehicles in the automotive industry tend to be cyclical in many markets, which may expose us to further volatility as we expand and adjust our operations. Decreases in the retail or wholesale prices of electricity from utilities or other renewable energy sources could make our products less attractive to customers. There can be no assurance that we will be able to compete successfully in our markets.

Our business and prospects depend significantly on our brands. If we are unable to maintain and enhance our brands, capture additional market share, or if our reputation and business are harmed, it could have a material and adverse impact on our business, financial condition, results of operations, and prospects.

Our business and prospects will heavily depend on our ability to develop, maintain, and strengthen the “Chijet,” “Shandong Baoya,” and “FAW Jilin” brands, which are associated with design, affordability, sustainability, and technological excellence. Promoting and positioning our brands will likely depend significantly on our ability to provide a consistently high-quality customer experience. To promote our brands, we may need to make changes or expansions to our customer development and branding practices, which could result in substantially increased expenses. This could involve the need to develop a direct sales network and utilize traditional media such as television, radio, and print advertising. Notably, any negative publicity, whether true or not, can spread rapidly on social media and harm consumer perception and confidence in our brands. Our ability to successfully position our brands could also be adversely affected by perceptions about the quality of our competitors’ vehicles or their successes. For instance, some of our competitors have faced significant scrutiny due to incidents involving their self-driving technology and battery fires, which could lead to similar scrutiny of our company.

Additionally, from time to time, our vehicles may undergo evaluation and reviews by third parties. Any negative reviews or unfavorable comparisons with our competitors in these evaluations could adversely affect consumer perception of our vehicles and potentially reduce demand for them. This could have a material and adverse effect on our business, results of operations, prospects, and financial condition.

Our sales will depend in part on our ability to establish and maintain confidence in our business prospects among consumers, analysts, and others within our industry.

Consumers may be less likely to purchase our products if they do not believe that our business will succeed or that our operations, including service and customer support operations, will continue for many years. Similarly, suppliers and other third parties will be less likely to invest time and resources in developing business relationships with us if they are not convinced that our business will succeed. Accordingly, to build, maintain, and grow our business, we must establish and maintain confidence among customers, suppliers, analysts, and other parties with respect to our liquidity and business prospects. Maintaining such confidence may be particularly difficult as a result of many factors, including our limited operating history in NEVs, others’ unfamiliarity with our products, uncertainty regarding the future of electric vehicles, any delays in scaling production, delivery, and service operations to meet demand, competition, and our production and sales performance compared with market expectations. Many of these factors are largely outside of our control, and any negative perceptions about our business prospects, even if exaggerated or unfounded, would likely harm our business and make it more difficult to raise additional capital in the future.

In addition, a significant number of NEV companies have recently entered the automotive industry, an industry historically associated with significant barriers to entry and a high rate of failure. If these new entrants or other manufacturers of electric vehicles go out of business, produce vehicles that do not perform as expected, or otherwise fail to meet expectations, such failures may increase scrutiny of others in the industry, including us. This could further challenge customer, supplier, and analyst confidence in our business prospects.

The automotive industry has significant barriers to entry that we must overcome in order to manufacture and sell electric vehicles at scale.

The automobile industry is characterized by significant barriers to entry, including large capital requirements, investment costs of developing, designing, manufacturing, and distributing vehicles, long lead times to bring vehicles to market from the concept and design stage, the need for specialized design and development expertise, regulatory requirements, establishing a brand name and image, and the need to establish sales and service locations. Since we are focused on electric vehicles, we face a variety of added challenges to entry that a traditional automobile manufacturer would not encounter, including additional costs of developing and producing an electric powertrain that has comparable performance to a traditional gasoline engine in terms of range and power, inexperience with selling and servicing electric vehicles, regulations associated with the transport of batteries, the need to establish or provide access to sufficient charging locations, and unproven high-volume customer demand for fully electric vehicles. If we are not able to overcome these barriers, our business, prospects, results of operations, and financial condition will be negatively impacted, and our ability to grow our business will be harmed.

We may be unable to adequately control the substantial costs associated with our operations.

We will require significant capital to develop and grow our business and will need to seek new financing in the future. We have incurred and expect to continue to incur significant expenses, including leases, sales and distribution expenses as we build our brand and market our vehicles; expenses relating to developing and manufacturing our vehicles; tooling and expanding our manufacturing facilities; research and development expenses; raw material procurement costs; and general and administrative expenses as we scale our operations and incur the costs of being a public company. In addition, we expect to incur significant costs servicing and maintaining our customers’ vehicles, including establishing our service operations, partnerships with service providers and facilities. These expenses could be significantly higher than we currently anticipate. Moreover, any delays in the start of testing or production, obtaining necessary equipment or supplies, expansion of our manufacturing facilities or manufacturing agreements, or the procurement of permits and licenses relating to our expected manufacturing, sales, and distribution model could significantly increase our expenses. In such an event, we could be required to seek additional financing earlier than we expect, and such financing may not be available on commercially reasonable terms or at all.

In the longer term, our ability to become profitable will depend not only on our ability to control costs but also on our ability to sell in quantities and at prices sufficient to achieve our expected margins. If we are unable to cost-efficiently develop, design, manufacture, market, sell, distribute, and service our vehicles, our margins, profitability, and prospects would be materially and adversely affected.

We have incurred net losses each year since our inception. As of December 31, 2023, we had working capital deficit of $434,226 thousand. We expect to continue this trend in the foreseeable future as we:

If our product development or commercialization is delayed, its costs and expenses may be significantly higher than we currently expect. Because we will incur the costs and expenses from these efforts before we receive any incremental revenues with respect thereto, we expect the losses in future periods will be significant.

Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report on our audited consolidated financial statements included in this annual report.

Our audited consolidated financial statements were prepared assuming that Chijet Group will continue as a going concern. However, the report of our independent registered public accounting firm included elsewhere in this annual report contains an explanatory paragraph on our consolidated financial statements stating there is substantial doubt about our ability to continue as a going concern, meaning that we may not be able to continue in operation for the foreseeable future or be able to realize assets and discharge liabilities in the ordinary course of operations. Such an opinion could materially limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise. There is no assurance that sufficient financing will be available when needed to allow us to continue as a going concern. The perception that we may not be able to continue as a going concern may also make it more difficult to raise additional funds or operate our business due to concerns about our ability to meet contractual obligations.

Based on our current operating plans, availability of short-term and long-term equity and debt financing arrangements, and financial support from existing Chijet shareholders, who may provide us additional equity financing in the case we are not able to meet financial liabilities, we believe that we have resources to fund our operations for at least the next twelve months, but we may require further funds to finance our activities thereafter. We may also consider potential financing options with banks or other third parties.

We depend on revenue generated from a limited number of models and expect this to continue in the foreseeable future.

We currently depend on revenue generated from R-Series vehicle models, V-Series, and T-Series, and in the foreseeable future, we will be significantly dependent on a limited number of models. Although we have other vehicle models in our product pipeline, we currently do not expect to introduce another vehicle model for sale until November 2024 or later. We expect to rely on sales from HEV and EV, among other sources of financing, for the capital that will be required to develop and commercialize those subsequent models (see*“—Risks Related to Financing and Strategic Transactions—We will require additional capital to support business growth, and this capital might not be available on commercially reasonable terms, or at all*.”). To the extent that the development or production of our vehicles is delayed or reduced, or if the vehicles are not well-received by the market for any reason, our revenues and cash flow would be adversely affected, and we may need to seek additional financing earlier than we expect, and such financing may not be available to us on commercially reasonable terms, or at all.

We rely on our partnerships with vehicle charging networks to provide charging solutions for our vehicles.

Demand for our vehicles will also depend in part on the availability of charging infrastructure. While the prevalence of charging stations has been increasing, charging station locations are significantly less widespread than gas stations. Some potential customers may choose not to purchase an electric vehicle because of the lack of a more widespread service network or charging infrastructure at the time of sale. Our ability to generate customer loyalty and grow our business could be impaired by a lack of satisfactory access to charging infrastructure. To the extent we are unable to meet user expectations or experience difficulties in providing charging solutions, demand for our vehicles may suffer, and our reputation and business may be materially and adversely affected.

We rely on our distributors and third-party service providers for servicing our vehicles and on their systems. If we are unable to adequately address the service requirements of our customers, our business, prospects, financial condition, and results of operations may be materially and adversely affected.

Certain of our distributors and third-party service providers have limited experience servicing or repairing our vehicles. This risk is enhanced by our limited operating history and our limited data regarding our vehicles’ real-world reliability and service requirements. Servicing electric vehicles is different from servicing vehicles with internal combustion engines and requires specialized skills, including high-voltage training and servicing techniques. As such, there can be no assurance that our service arrangements adequately address the service requirements of our customers to their satisfaction, or that we and our servicing partners have sufficient resources, experience, or inventory to meet these service requirements in a timely manner as the volume of vehicles we deliver increases. In addition, if we are unable to establish a widespread service network that provides satisfactory customer service, our customer loyalty, brand, and reputation could be adversely affected, which in turn could materially and adversely affect our sales, results of operations, prospects, and financial condition.

In addition, the motor vehicle industry laws in many jurisdictions require that service facilities be available to service vehicles physically sold from locations in the state. While we anticipate developing a service program that would satisfy regulatory requirements in these circumstances, the specifics of our service program are still in development, and at some point, they may need to be restructured to comply with state law, which may impact our business, financial condition, results of operations, and prospects.

Our customers will also depend on our customer support team to resolve technical and operational issues relating to the integrated software underlying our vehicles. As we grow, additional pressure may be placed on our customer support team or partners, and we may be unable to respond quickly enough to accommodate short-term increases in customer demand for technical support. We also may be unable to modify the future scope and delivery of our technical support to compete with changes in the technical support provided by our competitors. Increased customer demand for support, without corresponding revenue, could increase costs and negatively affect our results of operations. If we are unable to successfully address the service requirements of our customers, or if we establish a market perception that we do not maintain high-quality support, our brand and reputation could be adversely affected, and we may be subject to claims from our customers, which could result in loss of revenue or damages, and our business, results of operations, prospects, and financial condition could be materially and adversely affected.

If our vehicles fail to perform as expected, our ability to develop, market, and sell our products could be harmed.

Our vehicles may contain defects in components, software, design, or manufacture that may cause them not to perform as expected or that may require repairs, recalls, and design changes, any of which would require significant financial and other resources to successfully navigate and resolve. Our vehicles use a substantial amount of software code to operate, and software products are inherently complex and may contain defects and errors. If our vehicles contain defects in design and manufacture that cause them not to perform as expected or that require repair, or certain features of our vehicles take longer than expected to become available, are legally restricted, or become subject to additional regulation, our ability to develop, market, and sell our products and services could be harmed. Efforts to remedy any issues we observe in our products could significantly distract our management’s attention from other important business objectives, may not be timely, may hamper production, or may not be to the satisfaction of our customers. Further, our limited operating history and limited field data reduce our ability to evaluate and predict the long-term quality, reliability, durability, and performance characteristics of our battery packs, powertrains, and vehicles. There can be no assurance that we will be able to detect and fix any defects in our products prior to their delivery to customers.

Any defects, delays, or legal restrictions on vehicle features, or other failure of our vehicles to perform as expected, could harm our reputation and result in delivery delays, product recalls, product liability claims, breach of warranty claims, and significant warranty and other expenses, and could have a material and adverse impact on our business, results of operations, prospects, and financial condition. As a newer entrant to the industry attempting to build customer relationships and earn trust, these effects could be significantly detrimental to us. Additionally, problems and defects experienced by other electric consumer vehicles could, by association, have a negative impact on perception and customer demand for our vehicles.

In addition, even if our vehicles function as designed, we expect that the battery efficiency, and hence the range, of our electric vehicles, like other electric vehicles that use current battery technology, will decline over time. Other factors, such as usage, time, and stress patterns, may also impact the battery’s ability to hold a charge or could require us to limit vehicles’ battery charging ability for safety reasons or to protect battery capacity, which could further decrease our vehicles’ range between charges. Such decreases in or limitations of battery capacity and therefore range, whether imposed by deterioration, software limitations, or otherwise, could also lead to consumer complaints or warranty claims, including claims that prior knowledge of such decreases or limitations would have affected consumers’ purchasing decisions. There can be no assurance that we will be able to improve the performance of our battery packs or increase our vehicles’ range in the future. Any such battery deterioration or capacity limitations and related decreases in range may negatively influence potential customers’ willingness to purchase our vehicles and negatively impact our brand and reputation, which could adversely affect our business, prospects, results of operations, and financial condition.

We must develop complex software and technology systems, including in coordination with our strategic partners, vendors, and suppliers, to produce our electric vehicles, and there can be no assurance that such systems will be successfully developed.

Our vehicles use a substantial amount of externally developed and in-house software and complex technological hardware to operate, some of which is still subject to further development and testing. The development and implementation of such advanced technologies are inherently complex, and we will need to coordinate with our vendors and suppliers to integrate such technology into our electric vehicles and ensure it interoperates with other complex technology as designed and as expected. We may fail to detect defects and errors that are subsequently revealed, and our control over the performance of other parties’ services and systems may be limited. Any defects or errors in, or which are attributed to, our technology could result in, among other things:

In addition, if we are unable to develop the software and technology systems necessary to operate our vehicles, our competitive position will be harmed. We rely on our strategic partners and suppliers to develop a number of technologies for use in our products, including hybrid systems installed in our vehicles and independent developers developing third-party apps for our vehicles. There can be no assurances that our strategic partners and suppliers will be able to meet the technological requirements, production timing, and volume requirements to support our business plan. Furthermore, we may not be able to acquire exclusive intellectual property rights for such developed technologies and hardware. In addition, such technology may not satisfy the cost, performance, useful life, and warranty characteristics we anticipate in our business plan, which could materially and adversely affect our business, prospects, and results of operations.

Our vehicle production relies heavily on complex machinery and involves a significant degree of risk and uncertainty in terms of operational performance and costs.

Our vehicle production relies heavily on complex machinery and involves a significant degree of uncertainty and risk in terms of operational performance and costs. The existing plants and the planned manufacturing plants for our vehicles will consist of large-scale machinery combining many components. These manufacturing plant components are likely to suffer unexpected malfunctions from time to time and will depend on repairs and spare parts to resume operations, which may not be available when needed.

Unexpected malfunctions of the manufacturing plant components may significantly affect the intended operational efficiency of our operations. Operational performance and costs can be difficult to predict and are often influenced by factors outside of our control, such as, but not limited to, scarcity of natural resources, environmental hazards and remediation, costs associated with decommissioning of machines, labor disputes and strikes, difficulty or delays in obtaining governmental permits, damages or defects in electronic systems, industrial accidents, pandemics, fire, seismic activity, and natural disasters. Should operational risks materialize, it may result in the personal injury to or death of workers, the loss of production equipment, damage to manufacturing facilities, monetary losses, delays, and unanticipated fluctuations in production, environmental damage, administrative enforcement actions and fines, increased insurance costs, and potential legal liabilities, all of which could have a material and adverse effect on our business, results of operations, cash flows, financial condition, or prospects.

We rely on our partners to manufacture parts of our vehicles, and these partners may have limited experience in producing electric vehicles. Further, we rely on sufficient production capacity being available and/or allocated to us by our partners in order to manufacture parts of our vehicles. Delays in the timing of expected business milestones and commercial launches, including our ability to mass-produce our electric vehicles and/or complete and/or expand our manufacturing capabilities, could materially and adversely affect our business, financial condition, results of operations, and prospects.

Although we currently have manufacturing facilities, we may rely on our contract manufacturing arrangements with our partners to manufacture parts of our current and future models. We cannot provide any assurance as to whether our partners will be able to develop efficient, automated, low-cost production capabilities and processes and reliable sources of component supply that will enable us to meet the quality, price, engineering, design, and production standards, as well as the production volumes, required to successfully mass-market our vehicles. Even if our partners are successful in developing high-volume production capabilities and processes and reliably source their component supplies, no assurance can be given as to whether they will be able to do so in a manner that avoids significant delays and cost overruns, including as a result of factors beyond their and our control such as problems with suppliers and vendors, or force majeure events, or in time to meet our commercialization schedules or to satisfy the requirements of customers and potential customers. Any failure to develop such production processes and capabilities within our projected costs and timelines could have a material and adverse effect on our business, results of operations, prospects, and financial condition. Bottlenecks and other unexpected challenges may also arise as we ramp production, and it will be important that we address these challenges promptly while continuing to control our manufacturing costs. If we are not successful in doing so, or if we experience issues with our manufacturing process improvements, we could face delays in establishing and/or sustaining our production ramps or be unable to meet our related cost and profitability targets.

We face risks associated with international operations, including tariffs and unfavorable regulatory, political, tax, and labor conditions, which could materially and adversely affect our business, financial condition, results of operations, and prospects.

As part of our growth strategy, we intend to expand our sales, maintenance and repair services, and manufacturing activities to new countries in the coming years. However, we have limited experience to date manufacturing, selling, or servicing our vehicles in other countries and regions, and such expansion would require us to make significant expenditures, including the hiring of local employees, in advance of generating any revenue. We are subject to a number of risks associated with international business activities that may increase our costs, impact our ability to sell, service, and manufacture our vehicles, and require significant management attention. These risks include:

If we fail to successfully address these risks, our business, prospects, results of operations, and financial condition could be materially harmed.

Our growing presence increases our sensitivity to the economic, operational, and legal risks specific to China. For example, although the Chinese government has implemented measures since the late 1970s emphasizing the utilization of market forces for economic reform, including the reduction of state ownership of productive assets and the establishment of improved corporate governance in business enterprises, which are generally viewed as a positive development for foreign business investment, a substantial portion of productive assets in China is still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies. The Chinese government also exercises certain control over economic growth in China through allocating resources, controlling payments of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While China’s economy has experienced significant growth over the past decades, and the rate of growth has been slowing down, particularly in view of the effects of government actions to address the effects of the COVID-19 pandemic, including significant closures of businesses in 2022. For example, prolonged government-mandated quarantines and lockdowns in China during 2022 due to further outbreaks of COVID-19 have resulted in delays in the production and delivery of some components and delayed production of our vehicles. Please also see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry — Although the COVID-19 pandemic has affected our business and operations, those risks may be diminishing.” for more information on government-mandated quarantines and lockdowns in China due to COVID-19, their impact on the production and timely delivery of critical components for our vehicles by suppliers, and their impact on anticipated Chijet car volumes. Some of the governmental measures may benefit the overall Chinese economy but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Higher inflation could adversely affect our results of operations and financial condition. Furthermore, certain operating costs and expenses, such as employee compensation and office operating expenses, may increase as a result of higher inflation. In addition, the Chinese government has implemented in the past certain measures to control the pace of economic growth. These measures may cause decreased economic activity, which in turn could lead to a reduction in demand for our products and services and consequently have a material and adverse effect on our businesses, financial condition, and results of operations.

It is unclear whether and how our current or future business, prospects, financial condition, or results of operations may be affected by changes in China’s economic, political, and social conditions and in its laws, regulations, and policies. In addition, many of the economic reforms carried out by the Chinese government are unprecedented or experimental and are expected to be refined and improved over time. This refining and improving process may not necessarily have a positive effect on our operations and business development.

Additionally, the legal system in China is evolving rapidly, and there may be changes that may affect the protection afforded to us for our business and activities in China that are governed by Chinese laws and regulations. Any administrative and court proceedings may be protracted, resulting in substantial costs and diversion of resources and management attention. Since administrative and court authorities in China have discretion in interpreting and implementing statutory and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection for us. These uncertainties may impede our ability to enforce contracts and could materially and adversely affect our business, financial condition, and results of operations.

The Chinese government may intervene in or influence our operations in China at any time, which could result in a material change in our operations and ability to produce vehicles.

The Chinese government exerts substantial influence, discretion, oversight, and control over the manner in which companies incorporated under the laws and regulations of China must conduct their business activities, including activities relating to overseas offerings of securities and/or foreign investments in such companies. We are incorporated under the laws of the Cayman Islands and have subsidiaries with operations in mainland China. That may result in a material adverse change in our operations and cause the value of our securities to significantly decline or be worthless.

The Chinese government has recently published new policies that significantly affected certain industries such as the education and internet industries, and although we do not engage in such industries, we cannot rule out the possibility that the Chinese government will in the future release regulations or policies regarding our industry that could require us and our partners to seek permission from Chinese authorities to continue operating, which may adversely affect our business, financial condition, and results of operations.

Changes in Chinese policies, regulations, and rules may be quick with little advance notice, and the enforcement of laws of the Chinese government is subject to change and could have a significant impact upon our ability to operate profitably.

We rely on our operations and facilities located in China. Accordingly, economic, political, and legal developments in China will significantly affect our business, financial condition, results of operations, and prospects. Policies, regulations, rules, and the enforcement of laws of the Chinese government may have significant effects on economic conditions in China and the ability of businesses to operate profitably. Our ability to operate profitably may be adversely affected by rapid and unexpected changes in policies by the Chinese government, including changes in laws, regulations, their interpretation, and their enforcement.

If we update or discontinue the use of our manufacturing equipment more quickly than expected, we may have to shorten the useful lives of any equipment to be retired as a result of any such update, and the resulting acceleration in our depreciation could negatively affect our financial results.

We have invested and expect to continue to invest significantly in what we believe is necessary, including tooling, machinery, and other manufacturing equipment, and we depreciate the cost of such equipment over its expected useful lives. However, manufacturing technology may evolve rapidly, and we may decide to update our manufacturing processes more quickly than expected. Moreover, as we ramp the commercial production of our vehicles, our experience may cause us to discontinue the use of already installed equipment in favor of different or additional equipment. The useful life of any equipment that would be retired early as a result would be shortened, causing the depreciation on such equipment to be accelerated, and our results of operations could be negatively impacted.

Our adoption of a traditional dealer distribution network combined with a direct sale approach could limit opportunities to generate sales.

We do leverage the existing network of dealers partnered with FAW Jilin as a pipeline of potential operators of Chijet Locations or distributors (depending on the distribution approach in each region). Moreover, we compete with automakers with well-established distribution channels. If our adoption of a traditional dealer distribution network combined with a direct sale approach results in lost opportunities to generate sales, it could limit our ability to grow. Our expansion of our network of retail locations and service points may not fully meet users’ expectations. Our success will depend in large part on our ability to effectively develop our own sales channels and marketing strategies. Implementing our business model is subject to numerous challenges, including obtaining permits and approvals from government authorities, and we may not be successful in addressing these challenges.

Insufficient reserves to cover future warranty or part replacement needs or other vehicle repair requirements, including any potential software upgrades, could have a material and adverse effect on our business, prospects, financial condition, and results of operations.

We provide a manufacturer’s warranty on all vehicles, components, and systems we sell. We need to maintain reserves to cover part replacement and other vehicle repair needs, including any potential software upgrades or warranty claims. Warranty reserves will include our management team’s best estimate of the projected costs to repair or replace items under warranty. Such estimates are inherently uncertain, particularly in light of our limited operating history and the limited field data available to us, and changes to such estimates based on real-world observations may cause material changes to our warranty reserves in the future. If our reserves are inadequate to cover future maintenance requirements on our vehicles, our business, prospects, financial condition, and results of operations could be materially and adversely affected. We may become subject to significant and unexpected expenses as well as claims from our customers, including loss of revenue or damages. There can be no assurances that then-existing reserves will be sufficient to cover all claims. In addition, if future laws or regulations impose additional warranty obligations on us that go beyond our manufacturer’s warranty, we may be exposed to materially higher warranty, parts replacement, and repair expenses than we expect, and our reserves may be insufficient to cover such expenses.

We may be subject to risks associated with advanced driver assistance system technology. We are also working on adding autonomous driving technology to our vehicles and expect to be subject to the risks associated with this technology. We cannot guarantee that our vehicles will achieve our targeted assisted or autonomous driving functionality within our projected timeframe, or ever.

Our vehicles are planned to be designed with the advanced driver assistance system (“ADAS”) hardware, and we expect to launch automation functionalities and additional capabilities, including autonomous driving (“AD”), over time. ADAS/AD technologies are emerging and subject to known and unknown risks, and there have been accidents and fatalities associated with such technologies. The safety of such technologies depends in part on user interaction, and users, as well as other drivers on the roadways, may not be accustomed to using or adapting to such technologies. In addition, self-driving technologies are the subject of intense public scrutiny and interest, and previous accidents involving autonomous driving features in other vehicles, including alleged failures or misuse of such features, have generated significant negative media attention and government investigations. To the extent accidents associated with our ADAS or AD technologies occur, we could be subject to significant liability, negative publicity, government scrutiny, and further regulation. Any of the foregoing could materially and adversely affect our results of operations, financial condition, and growth prospects.

In addition, we face substantial competition in the development and deployment of ADAS/AD technologies. Many of our competitors and established automakers devoted significant time and resources to developing ADAS/AD technologies. If we are unable to develop competitive or more advanced ADAS/AD technologies in-house or acquire access to such technology via partnerships or investments in other companies or assets, we may be unable to equip our vehicles with competitive ADAS/AD features, which could damage our brand, reduce consumer demand for our vehicles, trigger cancellations of reservations, and could have a material and adverse effect on our business, results of operations, prospects, and financial condition. ADAS/AD technologies are also subject to considerable regulatory uncertainty, which exposes us to additional risks.

We may be impacted by uninsured losses, including losses resulting from product liability, accidents, acts of God, and other claims against us, which could result in payment of substantial damages, decrease our cash reserves, and harm our cash flow and financial condition.

In the ordinary course of our business, we may be subject to losses resulting from product liability, accidents, acts of God, and other claims against us, for which we may have no insurance coverage. While we currently carry various insurance policies, such as commercial general liability, commercial automobile liability, excess liability, product liability, and others, we may not maintain as much insurance coverage as other companies do, and in some cases, we may not maintain any coverage at all. Additionally, the policies we have may include significant deductibles, and we cannot be certain that our insurance coverage will be sufficient to cover all or any future claims against us. A loss that is uninsured or exceeds policy limits may require us to pay substantial amounts, which could adversely affect our financial condition and results of operations. Further, insurance coverage may not continue to be available to us, or if available, may come at a significantly higher cost, especially if insurance providers perceive any increase in our risk profile in the future.

Our vehicles will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.

The battery packs within our vehicles make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. Any such events or failures of our vehicles, battery packs, or warning systems could subject us to lawsuits, product recalls, or redesign efforts, all of which would be time-consuming and expensive. Also, negative public perceptions regarding the suitability of lithium-ion cells for automotive applications or any future incident involving lithium-ion cells, such as a vehicle or other fire, even if such incident does not involve our vehicles, could seriously harm our business and reputation.

Moreover, any failure of a competitor’s electric vehicle or energy storage product, as well as the mishandling of battery cells or a safety issue or fire related to the cells at partners’ manufacturing facilities, may cause indirect adverse publicity for us and our products. Such adverse publicity could negatively affect our brand and harm our business, prospects, results of operations, and financial condition.

Our ability to generate meaningful product revenue will depend on consumer adoption of electric vehicles. However, the market for electric vehicles is still evolving and changes in governmental programs incentivizing consumers to purchase electric vehicles, fluctuations in energy prices, the sustainability of electric vehicles, and other regulatory changes might negatively impact adoption of electric vehicles by consumers. If the pace and depth of electric vehicle adoption develop more slowly than we expect, our revenue may decline or fail to grow, and we may be materially and adversely affected.

We are focusing on developing electric vehicles, and accordingly, our ability to generate meaningful product revenue will highly depend on sustained consumer demand for alternative fuel vehicles in general and electric vehicles in particular. If the market for electric vehicles does not develop as we expect or develops more slowly than we expect, or if there is a decrease in consumer demand for electric vehicles, our business, prospects, financial condition, and results of operations will be harmed. The market for electric and other alternative fuel vehicles is relatively new and rapidly evolving and is characterized by rapidly changing technologies, price competition, additional competitors, evolving government regulations (including government incentives and subsidies), and industry standards, frequent new vehicle announcements, and changing consumer demands and behaviors. Any number of changes in the industry could negatively affect consumer demand for electric vehicles in general and our electric vehicles in particular.

In addition, demand for electric vehicles may be affected by factors directly impacting automobile prices or the cost of purchasing and operating automobiles, such as sales and financing incentives like tax credits, prices of raw materials and parts and components, cost of fuel or electricity, availability of consumer credit, and governmental regulations, including tariffs, import regulation, and other taxes. Volatility in demand may lead to lower vehicle unit sales, which may result in downward price pressure and adversely affect our business, prospects, financial condition, and results of operations. Further, sales of vehicles in the automotive industry tend to be cyclical in many markets, which may expose us to increased volatility, especially as we expand and adjust our operations and retail strategies. Specifically, it is uncertain how such macroeconomic factors will impact us as a newer entrant in an industry that has globally been experiencing a recent decline in sales.

Other factors that may influence the adoption of electric vehicles include:

The influence of any of the factors described above or any other factors may cause a general reduction in consumer demand for electric vehicles or our electric vehicles in particular, either of which would materially and adversely affect our business, results of operations, financial condition, and prospects.

Developments in electric vehicle or alternative fuel technology or improvements in the internal combustion engine may adversely affect the demand for our vehicles.

We may be unable to keep up with changes in electric vehicle technology or alternatives to electricity as a fuel source, and as a result, our competitiveness may suffer. Significant developments in alternative technologies, such as alternative battery cell technologies, hydrogen fuel cell technology, advanced gasoline, ethanol, or natural gas, or improvements in the fuel economy of the internal combustion engine, may materially and adversely affect our business and prospects in ways we do not currently anticipate. Existing and other battery cell technologies, fuels, or sources of energy may emerge as customers’ preferred alternative to the technologies in our electric vehicles. Any failure by us to develop new or enhanced technologies or processes or to react to changes in existing technologies could materially delay our development and introduction of new and enhanced electric vehicles, which could result in the loss of competitiveness of our vehicles, decreased revenues, and a loss of market share to competitors. In addition, we expect to compete in part on the basis of our vehicles’ range, efficiency, charging speeds, and performance, and improvements in the technology offered by competitors could reduce demand for our vehicles. As technologies change, we plan to upgrade or adapt our vehicles and introduce new models that reflect such technological developments, but our vehicles may become obsolete, and our research and development efforts may not be sufficient to adapt to changes in alternative fuel and electric vehicle technology. Additionally, as new companies and larger existing vehicle manufacturers continue to enter the electric vehicle space, we may lose any technological advantage we may have and suffer a decline in our competitive position. Any failure by us to successfully react to changes in existing technologies or the development of new technologies could materially harm our competitive position and growth prospects.

Our facilities or operations could be and have been adversely affected by events outside of our control, such as natural disasters, wars, health epidemics, or pandemics, or security incidents.

We may be impacted by natural disasters, wars, health epidemics, pandemics, or other events outside of our control. Further, if major disasters such as earthquakes, wildfires, tornadoes, or other events occur, or if our information system or communications network breaks down or operates improperly, our facilities and manufacturing may be seriously damaged or affected, or we may have to stop or delay production and shipment of our products. In addition, the ongoing COVID-19 pandemic has impacted economic markets, manufacturing operations, supply chains, employment, and consumer behavior across the world, and we have been, and may in the future be, adversely affected as a result. Furthermore, we could be impacted by physical security incidents at our facilities, which could result in significant damage to such facilities that could require us to delay or discontinue production of our vehicles. We may incur significant expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, results of operations, and financial condition.

If vehicle owners customize our vehicles or change the infrastructure with aftermarket products, the vehicle may not operate properly, which may create negative publicity and could harm our business.

Automobile enthusiasts may seek to alter our vehicles to modify their performance, which could compromise vehicle safety systems. Also, customers may customize their vehicles with aftermarket parts that can compromise driver safety. We do not test, nor do we endorse, such changes or products. In addition, the use of improper external cabling or unsafe charging outlets can expose customers to injury from high voltage electricity. Such unauthorized modifications could reduce the safety of our vehicles, and any injuries resulting from such modifications could result in adverse publicity that would negatively affect our brand and harm our business, prospects, financial condition, and operating results.

Risks Related to Cybersecurity and Data Privacy

We rely on our IT systems, and any material disruption to our IT systems could have a material and adverse effect on us.

The availability and effectiveness of our services depend on the continued operation of our information technology and communications systems. We rely on our IT systems, and such systems are vulnerable to damage or interruption from various adverse effects, such as fire, terrorist attacks, natural disasters, power loss, telecommunications failures, computer viruses, computer denial of service attacks, or other attempts to harm our systems. Our products and services are also highly technical and complex and may contain errors or vulnerabilities that could result in interruptions in our services or the failure of our systems or the systems on which we rely.

Any unauthorized control or manipulation of our products, digital sales tools, and systems could result in a loss of confidence in us and our products.

Our products contain complex information technology systems. We expect to collect, store, transmit, and otherwise process data from vehicles, customers, employees, and other third parties as part of our business operations, which may include personal data or confidential or proprietary information. We also work with third parties that collect, store, and process such data on our behalf and also use digital tools to sell vehicles to our customers. We have created a foundation of security policies and an information security directive and are in the process of creating and testing information security policies to deploy systems. We are creating measures to implement such policies, including encryption technologies, to prevent unauthorized access and plan to continue deploying additional security measures as we grow. Our third-party service providers and vendors will also be obliged to take steps to protect the security and integrity of our and their information technology systems and our and their customers’ information. However, there can be no assurance that such systems and measures will not be compromised as a result of intentional misconduct, including by employees, contractors, or vendors, as well as by software bugs, human error, or technical malfunctions.

Furthermore, hackers may in the future attempt to gain unauthorized access to, modify, alter, and use our vehicles, products, digital sales tools, and systems to (i) gain control of, (ii) change the functionality, user interface, and performance characteristics of, or (iii) gain access to data stored in or generated by our vehicles, products, digital sales tools, and systems. Advances in technology, an increased level of sophistication and diversity of our products, digital sales tools, and services, an increased level of expertise of hackers, and new discoveries in the field of cryptography could lead to a compromise or breach of the measures that we or our service providers use. Our and our service providers’ systems have in the past and may in the future be affected by security incidents. Our systems are also vulnerable to damage or interruption from, among other things, physical theft, fire, terrorist attacks, natural disasters, power loss, war, telecommunications failures, computer viruses, computer denial or degradation of service attacks, ransomware, social engineering schemes, domain name spoofing, insider theft, or misuse or other attempts to harm our products and systems. Our and our service providers’ or vendors’ data centers could be subject to break-ins, sabotage, and intentional acts of vandalism causing potential disruptions. Some of our systems will not be fully redundant. Further, our disaster recovery planning is not yet fully developed and cannot account for all eventualities. Any problems at our or our service providers’ or vendors’ data centers could result in lengthy interruptions in our service. There can be no assurance that any security or other operational measures that we or our service providers or vendors have implemented will be effective against any of the foregoing threats or issues.

If we are unable to protect our products, digital sales tools, and systems (and the information stored on such platforms) from unauthorized access, use, disclosure, disruption, modification, destruction, or other breach, such problems or security breaches could have negative consequences for our business and future prospects, subjecting us to substantial fines, penalties, damages, and other liabilities under applicable laws and regulations, incurring substantial costs to respond to, investigate, and remedy such incidents, reducing customer demand for our products, harming our reputation and brand, and compromising or leading to a loss of protection of our intellectual property or trade secrets. In addition, regardless of their veracity, reports of unauthorized access to our vehicles, systems, or data, as well as other factors that may result in the perception that our vehicles, systems, or data are capable of being “hacked,” could negatively affect our brand. In addition, some members of the U.S. federal government, including certain members of Congress and the National Highway Traffic Safety Administration (“NHTSA”), have recently focused attention on automotive cybersecurity issues and may in the future propose or implement regulations specific to automotive cybersecurity. In addition, the United Nations Economic Commission for Europe has introduced new regulations governing connected vehicle cybersecurity, which became effective in January 2021 and are expected to apply in the European Union to all new vehicle types beginning in July 2022 and to all new vehicles produced from July 2024. Such regulations are also in effect, or expected to come into effect, in certain other international jurisdictions. These and other regulations could adversely affect our future business in Europe and other markets, and if such regulations or other future regulations are inconsistent with our approach to automotive cybersecurity, we would be required to modify our systems to comply with such regulations upon entry of such markets, which would impose additional costs and delays and could expose us to potential liability to the extent our automotive cybersecurity systems and practices are inconsistent with such regulation.

In addition, our vehicles depend on the ability of software and hardware to store, retrieve, process, and manage immense amounts of data. Our software and hardware, including any over-the-air or other updates, may contain errors, bugs, design defects, or vulnerabilities, and our systems may be subject to technical limitations that may compromise our ability to meet our objectives. Some errors, bugs, or vulnerabilities may be inherently difficult to detect and may only be discovered after code has been released for external or internal use. Although we will attempt to remedy any issues we observe in our vehicles as effectively and rapidly as possible, such efforts may not be timely, may hamper production, or may not be to the satisfaction of our customers. Additionally, if we are able to deploy updates to the software addressing any issues, but our over-the-air update procedures fail to properly update the software, our customers would then need to arrange for installing such updates to the software, and their software may be subject to deficiencies and vulnerabilities until they do so. Any compromise of our intellectual property, proprietary information, systems, or vehicles or inability to prevent or effectively remedy errors, bugs, vulnerabilities, or defects in our software and hardware may cause us to suffer lengthy interruptions to our ability to operate our business and our customers’ ability to operate their vehicles, damage to our reputation, loss of customers, loss of revenue, governmental fines, investigations or litigation, or liability for damages, any of which could materially and adversely affect our business, results of operations, prospects, and financial condition.

Data privacy concerns are generally increasing, which could result in new legislation, negative public perception of our data collection practices and certain of our services or technologies, and/or changing user behaviors that negatively affect our business and product development plans.

In the course of our operations, we collect, use, store, disclose, transfer, and otherwise process personal information from customers, employees, and third parties with whom we conduct business, including names, accounts, user IDs, and passwords, and payment or transaction-related information. Additionally, we use our vehicles’ electronic systems to log information about vehicle use, such as charge time, battery usage, mileage, and driving behavior, in order to aid us in vehicle diagnostics, repair and maintenance, as well as to help us customize and improve the driving experience.

Data privacy concerns of consumers are generally increasing, which could result in new legislation, negative public perception of our data collection practices and certain of our services or technologies, and/or changing user behaviors that negatively affect our business and product development plans.

We are subject to evolving laws, regulations, standards, policies, and contractual obligations related to data privacy, security, and consumer protection, and any actual or perceived failure to comply with such obligations could harm our reputation and brand, subject us to significant fines and liability, or otherwise adversely affect our business.

Due to our data collection practices, products, services, and technologies, upon entries into relevant jurisdictions, we will be subject to or affected by a number of federal, state, local, and international laws and regulations, as well as contractual obligations and industry standards, that impose certain obligations and restrictions with respect to data privacy and security and govern our collection, storage, retention, protection, use, processing, transmission, sharing, and disclosure of personal information, including that of our employees, customers, and other third parties with whom we conduct business. These laws, regulations, and standards may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material and adverse impact on our business, financial condition, and results of operations.

The global data protection landscape is rapidly evolving, and implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. We may not be able to monitor and react to all developments in a timely manner. The European Union adopted the General Data Protection Regulation (“GDPR”), which became effective on May 25, 2018, and California adopted the California Consumer Privacy Act of 2018 (“CCPA”), which became effective in January 2020. Both the GDPR and the CCPA impose additional obligations on companies regarding the handling of personal data and provide certain privacy rights to individual persons whose data is collected. Compliance with existing, proposed, and recently enacted laws and regulations (including implementation of the privacy and process enhancements called for under the GDPR and CCPA) can be costly, and any failure to comply with these regulatory standards could subject us to legal and reputational risks.

Specifically, the CCPA establishes a privacy framework for covered businesses, including an expansive definition of personal information and data privacy rights for California residents. The CCPA includes a framework with potentially severe statutory damages for violations and a private right of action for certain data breaches. The CCPA requires covered businesses to provide California residents with new privacy-related disclosures and new ways to opt-out of certain uses and disclosures of personal information. As we expand our operations, the CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States. Additionally, effective in most respects starting on January 1, 2023, the California Privacy Rights Act (“CPRA”) will significantly modify the CCPA, including by expanding California residents’ rights with respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA.

Other jurisdictions have begun to propose similar laws. Compliance with applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms to comply with such laws and regulations, which could cause us to incur substantial costs or require us to change our business practices, including our data practices, in a manner adverse to our business. In particular, certain emerging privacy laws are still subject to a high degree of uncertainty as to their interpretation and application. Failure to comply with applicable laws or regulations or to secure personal information could result in investigations, enforcement actions, and other proceedings against us, which could result in substantial fines, damages, and other liability, as well as damage to our reputation and credibility, which could have a negative impact on our revenues and profits.

We post public privacy policies on our websites and provide privacy notices to the categories of persons whose personal information we collect, process, use, or disclose. Although we endeavor to comply with our published policies and other documentation, we may at times fail to do so or may be perceived to have failed to do so. Moreover, despite our efforts, we may not be successful in achieving compliance if our employees, contractors, service providers, vendors, or other third parties fail to comply with our published policies and documentation. Such failures could carry similar consequences or subject us to potential local, state, and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices. Claims that we have violated individuals’ privacy rights or failed to comply with data protection laws or applicable privacy notices could, even if we are not found liable, be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

Most jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities, and other third parties of security breaches involving certain types of data. Such laws may be inconsistent or may change, or additional laws may be adopted. In addition, our agreements with certain customers may require us to notify them in the event of a security breach. Such mandatory disclosures are costly, could lead to negative publicity, penalties or fines, litigation, and our customers losing confidence in the effectiveness of our security measures, and could require us to expend significant capital and other resources to respond to or alleviate problems caused by the actual or perceived security breach. Any of the foregoing could materially and adversely affect our business, prospects, results of operations, and financial condition.

Risks Related to Our Employees and Human Resources

Our ability to effectively manage our growth relies on the performance of highly skilled personnel, including our Chief Executive Officer Mu Hongwei, our senior management team, and other key employees, and our ability to recruit and retain key employees. The loss of key personnel or an inability to attract, retain, and motivate qualified personnel may impair our ability to expand our business.

Our success is substantially dependent upon the continued service and performance of our senior management team and key personnel with digital, technical, and automotive expertise. Although we anticipate that our management and key personnel will remain in place, it is possible that we could lose some key personnel. For example, we are highly dependent on the services of Mu Hongwei, our Chief Executive Officer. Mr. Mu has a significant influence on and is a driver of our business plan and business, design, and technology development. If Mr. Mu were to discontinue his service to us, we would be significantly disadvantaged. The replacement of any members of our senior management team or other key personnel would likely involve significant time and costs and may significantly delay or prevent the achievement of our business objectives. Our future success also depends, in part, on our ability to continue to attract, integrate, and retain highly skilled personnel.

Competition for highly skilled personnel is frequently intense. As with any company, there can be no guarantee that we will be able to attract such individuals or that the presence of such individuals will necessarily translate into our profitability. Because we operate in a newly emerging industry, there may also be limited personnel available with relevant business experience, and such individuals may be subject to non-competition and other agreements that restrict their ability to work for us. Our inability to attract and retain key personnel may materially and adversely affect our business operations. Any failure by our management to effectively anticipate, implement, and manage the changes required to sustain our growth would have a material and adverse effect on our business, financial condition, and results of operations.

Misconduct by our employees and independent contractors during and before their employment with us could expose us to potentially significant legal liabilities, reputational harm, and/or other damages to our business.

Many of our employees play critical roles in ensuring the safety and reliability of our vehicles and/or our compliance with relevant laws and regulations. Certain of our employees have access to sensitive information and/or proprietary technologies and know-how. While we have adopted codes of conduct for all of our employees and implemented policies relating to intellectual property, confidentiality, and the protection of company assets, we cannot assure you that our employees will always abide by these codes, policies, and procedures, nor that the precautions we take to detect and prevent employee misconduct will always be effective. If any of our employees engages in any misconduct, illegal or suspicious activities, including but not limited to misappropriation or leakage of sensitive customer information or proprietary information, we and such employees could be subject to legal claims and liabilities, and our reputation and business could be adversely affected as a result.

In addition, while we have screening procedures during the recruitment process, we cannot assure you that we will be able to uncover misconduct of job applicants that occurred before we offered them employment, or that we will not be affected by legal proceedings against our existing or former employees as a result of their actual or alleged misconduct. Any negative publicity surrounding such cases, especially in the event that any of our employees is found to have committed any wrongdoing, could negatively affect our reputation and may have an adverse impact on our business.

Furthermore, we face the risk that our employees and independent contractors may engage in other types of misconduct or other illegal activity, such as intentional, reckless, or negligent conduct that violates production standards, workplace health and safety regulations, fraud, abuse, or consumer protection laws, other similar non-U.S. laws, or laws that require the true, complete, and accurate reporting of financial information or data. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. In addition, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, prospects, financial condition, and results of operations, including, without limitation, the imposition of significant civil, criminal, and administrative penalties, damages, monetary fines, disgorgement, integrity oversight and reporting obligations to resolve allegations of non-compliance, imprisonment, other sanctions, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our business, prospects, financial condition, and results of operations.

Risks Related to Litigation and Regulations

We are subject to evolving laws and regulations that could impose substantial costs, legal prohibitions, or unfavorable changes upon our operations or products, and any failure to comply with these laws and regulations, including as they evolve, could result in litigation and substantially harm our business and results of operations.

We have been subject to complex environmental, manufacturing, health, and safety laws and regulations at numerous jurisdictional levels, including laws relating to the use, handling, storage, recycling, disposal, and human exposure to hazardous materials and with respect to constructing, expanding, and maintaining our facilities. For example, we are subject to laws, regulations, and regulatory agencies like the Provisions on the Administration of Investments in the Automotive Industry in China. The costs of compliance, including remediating contamination if any is found on our properties and any changes to our operations mandated by new or amended laws, may be significant. We may also face unexpected delays in obtaining permits and approvals required by such laws in connection with the manufacturing and sale of our vehicles, which would hinder our ability to conduct our operations. Such costs and delays may adversely impact our business prospects and results of operations. Furthermore, any violations of these laws may result in litigation, substantial fines and penalties, remediation costs, third-party damages, or a suspension or cessation of our operations.

In addition, motor vehicles are subject to substantial regulation under international, federal, state, and local laws. We have incurred, and expect to continue to incur, significant costs in complying with these regulations. Any failures to comply could result in litigation, significant expenses, delays, or fines. Generally, vehicles must meet or exceed mandated motor vehicle safety standards to be certified under applicable regulations. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving certification. Any future vehicles will be subject to substantial regulation under federal, state, and local laws and standards. These regulations include those promulgated by various government agencies, and compliance certification is required for each new model year and changes to the model within a model year. These laws and standards are subject to change from time to time, and we could become subject to additional regulations in the future, which would increase the effort and expense of compliance. In addition, federal, state, and local laws and industrial standards for electric vehicles are still developing, and we face risks associated with changes to these regulations, which could have an impact on the acceptance of our electric vehicles, and increased sensitivity by regulators to the needs of established automobile manufacturers with large employment bases, high fixed costs, and business models based on the internal combustion engine, which could lead them to pass regulations that could reduce the compliance costs of such established manufacturers or mitigate the effects of government efforts to promote electric vehicles. Compliance with these regulations is challenging, burdensome, time-consuming, and expensive. If compliance results in litigation, delays, or substantial expenses, our business could be adversely affected.

We or our subsidiaries may have undertaken, or in the future may choose to or be compelled to undertake, product recalls or to take other actions that could result in litigation and adversely affect our business, prospects, results of operations, reputation, and financial condition.

Product recalls, if any occur, may result in litigation and adverse publicity and may damage our reputation and adversely affect our business, prospects, results of operations, and financial condition. In the future, we may, voluntarily or involuntarily, initiate a recall if any of our electric vehicles or components (including our battery cells) prove to be defective or noncompliant with applicable federal motor vehicle safety standards. If a large number of vehicles are the subject of a recall or if needed replacement parts are not in adequate supply, we may be unable to service and repair recalled vehicles for a significant period of time. These types of disruptions could jeopardize our ability to fulfill existing contractual commitments or satisfy demand for our electric vehicles and could also result in the loss of business to our competitors. Such recalls, whether caused by systems or components engineered or manufactured by us or our suppliers, would involve significant expense and diversion of management’s attention and other resources, which could adversely affect our brand image in our target market and our business, prospects, results of operations, and financial condition.

We may in the future be subject to legal proceedings, regulatory disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, results of operations, cash flows, and financial condition.

From time to time, we may be subject to claims, lawsuits, government investigations, and other proceedings involving product liability, consumer protection, competition and antitrust, intellectual property, privacy, securities, tax, labor and employment, health and safety, our direct distribution model, environmental claims, commercial disputes, corporate, and other matters that could adversely affect our business, results of operations, cash flows, and financial condition. In the ordinary course of business, we have been the subject of complaints or litigation, including claims.

Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Additionally, our litigation costs could be significant, even if we achieve favorable outcomes. Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify, make temporarily unavailable, or stop manufacturing or selling our vehicles in some or all markets, all of which could negatively affect our sales and revenue growth and adversely affect our business, prospects, results of operations, cash flows, and financial condition.

The results of litigation, investigations, claims, and regulatory proceedings cannot be predicted with certainty, and determining reserves for pending litigation and other legal and regulatory matters requires significant judgment. There can be no assurances that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business, results of operations, cash flows, and financial condition. In addition, the threat or announcement of litigation or investigations by governmental authorities or other parties, irrespective of the merits of the underlying claims, may itself have an adverse impact on the trading price of our securities.

We may become subject to product liability claims, which could harm our financial condition and liquidity if we are not able to successfully defend or insure against such claims.

We may become subject to product liability claims, which could harm our business, prospects, results of operations, and financial condition. The automotive industry experiences significant product liability claims, and we face inherent risks of exposure to claims in the event our vehicles do not perform or are claimed not to perform as expected or malfunction, resulting in property damage, personal injury, or death. We also expect that, as is true for other automakers, our vehicles will be involved in crashes resulting in death or personal injury, and even if not caused by the failure of our vehicles, we may face product liability claims and adverse publicity in connection with such incidents. In addition, we may face claims arising from or related to failures, claimed failures, or misuse of new technologies that we expect to offer, including ADAS/AD features and future upgrades in our vehicles. In addition, the battery packs that we utilize make use of lithium-ion cells. On rare occasions, lithium-ion cells can rapidly release the energy they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells (see “—Risks Related to Our Business and Industry—Our vehicles will make use of lithium-ion battery cells, which have been observed to catch fire or vent smoke and flame.”). Any such events or failures of our vehicles, battery packs, or warning systems could subject us to lawsuits, product recalls, or redesign efforts, all of which would be time-consuming and expensive.

A successful product liability claim against us could require us to pay a substantial monetary award. Moreover, a product liability claim against us or our competitors could generate substantial negative publicity about our vehicles and business and inhibit or prevent commercialization of our future vehicles, which would have material and adverse effects on our brand, business, prospects, and results of operations. Our insurance coverage might not be sufficient to cover all potential product liability claims, and insurance coverage may not continue to be available to us or, if available, may be at a significantly higher cost. Any lawsuit seeking significant monetary damages or other product liability claims may have a material and adverse effect on our reputation, business, and financial condition.

Our suppliers and manufacturing partners may be exposed to delays, limitations, and risks related to the environmental permits and other operating permits required to operate manufacturing facilities for our vehicles.

Operation of an automobile manufacturing facility requires land use and environmental permits and other operating permits from federal, state, and local government entities. We may expand our manufacturing capacities by entering into additional agreements with our suppliers and manufacturing partners over time to achieve a future target production capacity and will be required to apply for and secure various environmental, wastewater, and land use permits and certificates of occupancy necessary for the commercial operation of such expanded and additional facilities. Delays, denials, or restrictions on any of the applications for or assignment of the permits to operate our manufacturing facilities could adversely affect our ability to execute on our business plans and objectives based on our current target production capacity or our future target production capacity.

If we fail to implement and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations, meet reporting obligations, or prevent fraud. As a result, our security holders could lose confidence in our financial and other public reporting, which would harm our business and trading price of our securities.

In the course of preparing and auditing consolidated financial statements for the year ended December 31, 2022, we and our independent registered public accounting firm identified two material weaknesses in our internal controls over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal controls, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The two material weaknesses that have been identified relate to (i) lack of sufficient internal capabilities and resources with relevant experience, skills, and knowledge in accounting and financial reporting under the requirements of U.S. GAAP and rules set forth by the SEC to prepare financial statements and related footnote disclosures in accordance with U.S. GAAP, and (ii) lack of regular reconciliations with third-party suppliers and customers, which increases the risk of inaccurate financial reporting because transactions could be improperly recorded and the misstatements might not be identified and corrected on a timely basis.

Following the identification of the material weaknesses, we have taken measures to remedy the material weakness. Our management has concluded that our internal control over financial reporting was effective as of December 31, 2023 after the remediation. For details on these measures, please see “Item 15. Controls and Procedures—Internal Control over Financial Reporting.”

However, in the future, we may determine that we have additional material weaknesses, or our independent registered public accounting firm may disagree with our management assessment of the effectiveness of our internal controls, after conducting its own independent testing. Our failure to correct any future material weaknesses or failure to discover and address any other material weaknesses or control deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis, which could cause investors to lose confidence in our reported financial information, resulting in volatility in and a decline in the market price of our securities.

Furthermore, it is possible that, had our independent registered public accounting firm conducted an audit of our internal control over financial reporting, they might have identified additional material weaknesses and deficiencies. We are subject to the Sarbanes-Oxley Act of 2002, and the Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that we include a report from management on the effectiveness of its internal control over financial reporting in our annual report on Form 20-F. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated, or reviewed, or if it interprets the relevant requirements differently from us. In addition, the reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

We are subject to various environmental, health, and safety laws and regulations that could impose substantial costs on us and cause delays in expanding our production capabilities.

Our manufacturing partners’ operations are subject to environmental laws and regulations in different jurisdictions. Environmental, health, and safety laws and regulations are complex, and we have limited experience complying with them. Moreover, we may be affected by future amendments to such laws or other new environmental, health, and safety laws and regulations which may require us to change our operations, potentially resulting in a material and adverse effect on our business, prospects, results of operations, and financial condition. These laws can give rise to liability for administrative oversight costs, cleanup costs, property damage, bodily injury, fines and penalties. Capital and operating expenses needed to comply with environmental laws and regulations can be significant, and violations could result in litigation and substantial fines and penalties, third-party damages, suspension of production or a cessation of operations.

We are planning to introduce ADAS/AD technology, which is subject to uncertain and evolving regulations.

We expect to introduce ADAS/AD technologies into our vehicles over time. ADAS/AD technology is subject to considerable regulatory uncertainty as the law in different jurisdictions evolves to catch up with the rapidly evolving nature of the technology itself, all of which is beyond our control. There is a variety of government regulations that may apply to self-driving and driver-assisted vehicles, which include many existing vehicle standards that were not originally intended to apply to vehicles that may not have a driver. Self-driving laws and regulations are expected to continue to evolve in numerous jurisdictions in China and foreign countries, which increases the likelihood of a patchwork of complex or conflicting regulations that may delay products or restrict self-driving features and availability, which could adversely affect our business. Any such requirements or limitations could impose significant expense or delays and could harm our competitive position, which could adversely affect our business, prospects, results of operations, and financial condition.

The unavailability, reduction, elimination or the conditionality of certain government and economic programs could have a material and adverse effect on our business, prospects, financial condition, and results of operations.

We have benefited from government subsidies, economic incentives, and government policies that support the growth of electric vehicles. These government and economic programs are subject to certain limits as well as changes that are beyond our control, and we cannot assure you that future changes, if any, would be favorable to our business and could result in margin pressures. For example, if government regulations and economic programs have the effect of imposing electric vehicle production quotas on automobile manufacturers, the market for electric vehicles may become oversaturated. Further, any uncertainty or delay in collection of the government subsidies may also have an adverse impact on our financial condition. Any of the foregoing could materially and adversely affect our business, financial condition, and results of operations.

Furthermore, we may not be able to obtain or agree on acceptable terms and conditions for all or a significant portion of the government grants, loans, and other incentives for which we may apply. As a result, our business and prospects may be adversely affected.

Risks Related to Intellectual Property

We may fail to adequately obtain, maintain, enforce, and protect our existing and future intellectual property and licensing rights, and we may not be able to prevent third parties from unauthorized use of our intellectual property and proprietary technology. If we are unsuccessful in any of the foregoing, our competitive position could be harmed, and we could be required to incur significant expenses to enforce our rights.

Our ability to compete effectively is dependent in part upon our ability to obtain, maintain, enforce, and protect our existing and future intellectual property, proprietary technology, and licensing rights, but we may not be able to prevent third parties from the unauthorized use of our intellectual property and proprietary technology, which could harm our business and competitive position. We establish and protect our intellectual property and proprietary technology through a combination of licensing agreements, nondisclosure and confidentiality agreements, and other contractual provisions, as well as through patent, trademark, copyright, and trade secret laws in China. Despite our efforts to obtain and protect intellectual property rights, there can be no assurance that these protections will be available in all cases, or will guarantee our success in claiming the intellectual property rights, or will be adequate or timely to prevent our competitors or other third parties from copying, reverse engineering, or otherwise obtaining and using our technology or products or seeking court declarations that they do not infringe, misappropriate, or otherwise violate our intellectual property. Failure to adequately obtain, maintain, enforce, and protect our intellectual property could result in our competitors offering identical or similar products, potentially resulting in the loss of our competitive advantage and a decrease in our revenue, which would adversely affect our business, prospects, financial condition, and results of operations.

The measures we take to obtain, maintain, protect, and enforce our intellectual property, including preventing unauthorized use by third parties, may not be effective for various reasons, including the following:

Patent, trademark, copyright, and trade secret laws vary significantly throughout the world. The laws of some countries, including countries in which we produce or will sell our products, may not be as protective as the laws in the United States, and mechanisms for obtaining and enforcing intellectual property rights may be ineffectual or inadequate. Further, policing the unauthorized use of our intellectual property in some jurisdictions may be difficult or too expensive to be practical. In addition, third parties may seek to challenge, invalidate, or circumvent our patents, trademarks, copyrights, trade secrets, or other intellectual property, or applications for any of the foregoing, which could permit our competitors or other third parties to develop and commercialize products and technologies that are the same or similar to ours.

While we have registered and applied for registration of trademarks in an effort to protect our brand and goodwill with customers, competitors, or other third parties have in the past and may in the future oppose our trademark applications or otherwise challenge our use of the trademarks and other brand names in which we have invested. Such oppositions and challenges can be expensive and may adversely affect our ability to maintain the goodwill gained in connection with a particular trademark. In addition, we may lose our trademark rights if we are unable to submit specimens or other evidence of use by the applicable deadline to perfect such trademark rights.

Furthermore, we cannot be certain that these agreements will not be breached and that third parties will not improperly gain access to our trade secrets, know-how, and other proprietary technology. Third parties may also independently develop the same or substantially similar proprietary technology. Monitoring unauthorized use of our intellectual property is difficult and costly, as are the steps we have taken or will take to prevent misappropriation.

We have acquired or licensed, and plan to further acquire licenses, patents, and other intellectual property from third parties, including suppliers and service providers, and we may face claims that our use of this acquired or in-licensed technology infringes, misappropriates, or otherwise violates the intellectual property rights of third parties. In such cases, we will seek indemnification from our licensors or other applicable entities. However, our rights to indemnification may be unavailable or insufficient to cover our costs and losses. Furthermore, disputes may arise with our licensors or other applicable entities regarding the intellectual property subject to, and any of our rights and obligations under, any license or other commercial agreement.

To prevent the unauthorized use of our intellectual property, it may be necessary to prosecute actions for infringement, misappropriation, or other violation of our intellectual property against third parties. Any such action could result in significant costs and diversion of our resources and management’s attention, and there can be no assurances that we will be successful in any such action, and may result in a loss of intellectual property rights. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than we currently do. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing, misappropriating, or otherwise violating our intellectual property. Any of the foregoing could adversely affect our business, prospects, financial condition, and results of operations.

We use other parties’ software and other intellectual property in our proprietary software, including “open source” software. Any inability to continuously use such software or other intellectual property in the future could have a material adverse impact on our business, financial condition, results of operations, and prospects.

We use open source software in our products and anticipate using open source software in the future. Some open source software licenses require those who distribute open source software as part of their own software product to publicly disclose all or part of the source code to such software product or to make available any derivative works of the open source code on unfavorable terms or at no cost, and we may be subject to such terms. The terms of many open source licenses to which we are subject have not been interpreted by U.S. or other courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third parties, including our competitors, develop products and services that are similar to or better than ours. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred. Additionally, we could face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license, or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement, which may be a costly and time-consuming process, and we may not be able to complete the re-engineering process successfully.

Additionally, the use of certain open source software can lead to greater risks than use of other parties’ commercial software, as open source licensors generally do not provide warranties or controls on the origin of software. There is typically no support available for open source software, and we cannot ensure that the authors of such open source software will implement or push updates to address security risks or will not abandon further development and maintenance. Many of the risks associated with the use of open source software, such as the lack of warranties or assurances of title or performance, cannot be eliminated, and could, if not properly addressed, negatively affect our business. Any of these risks could be difficult to eliminate or manage and, if not addressed, could have a material and adverse effect on our business, financial condition, and results of operations.

We may become subject to claims of intellectual property infringement by third parties which, regardless of merit, could be time-consuming and costly and result in significant legal liability, and could negatively impact our business, financial condition, results of operations, and prospects.

Our competitors or other third parties may hold or obtain patents, copyrights, trademarks, or other proprietary rights that could prevent, limit, or interfere with our ability to make, use, develop, sell, or market our products and services, which could make it more difficult for us to operate. From time to time, the holders of such intellectual property rights may assert their rights and urge us to take licenses and/or may bring suits alleging infringement or misappropriation of such rights, which could result in substantial costs, negative publicity, and management attention, regardless of merit. While we endeavor to obtain and protect the intellectual property rights that we expect will allow us to retain or advance our strategic initiatives, there can be no assurance that we will be able to adequately identify and protect the portions of intellectual property that are strategic to our business, or mitigate the risk of potential suits or other legal demands by our competitors. Accordingly, we may consider entering into licensing agreements with respect to such rights, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur, and such licenses and associated litigation could significantly increase our operating expenses. In addition, if we are determined to have or believe there is a high likelihood that we have infringed upon a third party’s intellectual property rights, we may be required to cease making, selling, or incorporating certain components or intellectual property into our goods and services, to pay substantial damages and/or license royalties, to redesign our products and services and/or to establish and maintain alternative branding for our products and services. In the event that we are required to take one or more such actions, our brand, business, financial condition, and operating results may be harmed***.***

Risks Related to Financing and Strategic Transactions

We will require additional capital to support business growth, and this capital might not be available on commercially reasonable terms, or at all.

We anticipate that we will need to raise additional funds through equity or debt financings. Our business is capital-intensive, and we expect that the costs and expenses associated with our planned operations will continue to increase in the near term. We do not expect to achieve positive cash flow from operations in the short term, if at all. Our plan to grow our business is dependent upon the timely availability of funds and further investment in development, component procurement, testing, and the build-out of manufacturing capabilities. In addition, the fact that we have a limited operating history means that we have limited historical data on the demand for our vehicles. As a result, our future capital requirements are uncertain, and actual capital requirements may be greater than what we currently anticipate.

If we raise additional funds through further issuances of equity or convertible debt securities, our shareholders could suffer significant dilution and economic loss, and any new equity securities we issue could have rights, preferences, and privileges superior to those of holders of our current equity securities. Any debt financing in the future could involve additional restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.

We may not be able to obtain additional financing on terms favorable to us, if at all. Our ability to obtain such financing could be adversely affected by a number of factors, including general conditions in the global economy and in the global financial markets, including recent volatility and disruptions in the capital and credit markets, including as a result of the ongoing COVID-19 pandemic, inflation, interest rate changes, and the ongoing conflict between Ukraine and Russia, or investor acceptance of our business model. These factors may make the timing, amount, terms, and conditions of such financing unattractive or unavailable to us. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, we will have to significantly reduce our spending, delay or cancel our planned activities, or substantially change our corporate structure, and we might not have sufficient resources to conduct or support our business as projected, which would have a material and adverse effect on our results of operations, prospects, and financial condition.

Our financial results may vary significantly from period to period due to fluctuations in our operating costs, product demand, and other factors.

We expect our period-to-period financial results to vary based on our operating costs and product demand, which we anticipate will fluctuate as we continue to design, develop, and manufacture new vehicles, increase production capacity, and establish or expand design, research and development, production, sales, and service facilities. Our revenues from period to period may fluctuate as we identify and investigate areas of demand, adjust volumes, and add new product derivatives based on market demand and margin opportunities, develop and introduce new vehicles, or introduce existing vehicles to new markets for the first time. In addition, automotive manufacturers typically experience significant seasonality, with comparatively low sales in the first quarter and comparatively high sales in the fourth quarter. Our period-to-period results of operations may also fluctuate because of other factors including labor availability and costs for hourly and management personnel; profitability of our vehicles, especially in new markets; changes in interest rates; impairment of long-lived assets; macroeconomic conditions, both internationally and locally; negative publicity relating to our vehicles; changes in consumer preferences and competitive conditions; or investment in expansion into new markets. As a result of these factors, we believe that period-to-period comparisons of our financial results, especially in the short term, may have limited utility as an indicator of future performance. Significant variation in our quarterly performance could significantly and adversely affect the trading price of our securities.

Risks Related to Doing Business in China

The Holding Foreign Companies Accountable Act (“HFCAA”), together with recent joint statement by the SEC and PCAOB, Nasdaq rule changes, a determination by the PCAOB that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, all call for additional and more stringent criteria to be applied to emerging market companies upon assessing the qualification of their auditors, especially the non-U.S. auditors who are not inspected by the PCAOB. These developments add uncertainties to our ability to be listed on U.S. stock exchanges.

On April 21, 2020, SEC Chairman Jay Clayton and PCAOB Chairman William D. Duhnke III, along with other senior SEC staff, released a joint statement highlighting the disclosure, financial reporting and other risks associated with investing in companies based in or have substantial operations in emerging markets including China as well as the limited remedies available to investors who might take legal action against such companies. The joint statement emphasized the risks associated with lack of access for the PCAOB to inspect auditors and audit work papers in China and higher risks of fraud in emerging markets.

On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market,” (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors. These proposals were approved by the SEC on October 4, 2021. These developments add uncertainties to our ability to be listed on U.S. stock exchanges, including the possibility that Nasdaq can stop trading in our securities if the PCAOB cannot inspect or fully investigate our auditor.

Furthermore, various equity-based research organizations have recently published reports on China-based companies after examining their corporate governance practices, related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges. Any similar scrutiny on us, regardless of its lack of merit, could cause the market price of our shares to fall, divert management resources and energy, cause us to incur expenses in defending ourselves against rumors, and increase the premiums we pay for director and officer insurance.

On May 20, 2020 and December 2, 2020, the United States Senate and the United States House of Representatives, respectively, passed S. 945, the HFCAA, which was signed into law on December 18, 2020. The HFCAA requires a foreign company to certify that it is not owned or manipulated by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection. If the PCAOB is unable to inspect the company’s auditors for three consecutive years, the issuer’s securities are prohibited from trading on a national exchange. On June 22, 2021, the United States Senate passed the Accelerating Holding Foreign Companies Accountable Act, which has been introduced in the United States House of Representatives. This Act, if enacted, would decrease the number of non-inspection years from three years to two, thus reducing the time period before our Ordinary Shares may be prohibited from trading or delisted. On February 4, 2022, the United States House of Representatives passed a bill, which contained, among other things, an identical provision. If this provision is enacted into law, the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA will be reduced from three years to two. Although we believe that the HFCAA and the related regulations do not currently affect us, we cannot assure you that there will not be any further implementations and interpretations of the HFCAA or the related regulations, which might pose regulatory risks to and impose restrictions on us because of our primary operations in China.

The lack of access to the PCAOB inspection in China prevents the PCAOB from fully evaluating audits and quality control procedures of the auditors based in China. As a result, the investors may be deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of these accounting firms’ audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause existing and potential investors in our stock to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

On December 2, 2021, the SEC issued final rules under the HFCAA, which became effective on January 10, 2022, amending the disclosure requirements in annual reports. These amendments apply to registrants that the SEC identifies as having filed an annual report issued by a registered public accounting firm that is located in a foreign jurisdiction that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in that jurisdiction. The amendments require the submission of documentation to the Commission establishing that such a registrant is not owned or controlled by a governmental entity in that foreign jurisdiction and also require disclosure in a foreign issuer’s annual report regarding the audit arrangements of, and governmental influence on, such registrants. The Commission is to identify a reporting company that has retained a registered public accounting firm to issue an audit report where that registered public accounting firm has a branch or office that:

Once identified, Section 104(i)(2)(B) of the Sarbanes-Oxley Act requires these issuers, which the SEC refers to as “Commission-Identified Issuers,” to submit in connection with their annual report documentation to the Commission establishing that they are not owned or controlled by a governmental entity in that foreign jurisdiction and to name any director who is affiliated with the Chinese Communist Party or whether the company’s articles include any charter of the Chinese Communist Party.

On December 16, 2021, the PCAOB determined that the PCAOB is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong, because of positions taken by PRC authorities in those jurisdictions, and the PCAOB included in the report of its determination a list of the accounting firms that are headquartered in the PRC or Hong Kong. Our former auditor, UHY LLP, an independent registered public accounting firm headquartered in the United States, was not included in the determinations made by the PCAOB on December 16, 2021. Our current auditor, Assentsure PAC, an independent registered public accounting firm headquartered in Singapore, was not included in the determinations made by the PCAOB on December 16, 2021. Assentsure PAC is currently subject to PCAOB inspections and will be inspected by the PCAOB on a regular basis, with the upcoming inspecting expected in September 2024.

In the event the PCAOB expands the category of firms which it cannot inspect in future and include our current auditor Assentsure PAC in the list, we must change our independent auditor in sufficient time so as to meet the requirements of SEC and Nasdaq. If we fail to change auditors to meet the SEC and Nasdaq requirements, we will be delisted from the Nasdaq, and our Ordinary Shares are unable to be listed on another securities exchange or traded on an over-the-counter market in the United States, your ability to sell or purchase our Ordinary Shares when you wish to do so will be impaired, and the risk and uncertainty associated with a potential delisting would have a negative impact on the market for and the price of our Ordinary Shares. We cannot assure you that, because our books and records are located in China, we will in the future be able to become an issuer that is not a Commission-Identified Issuer, in which event our Ordinary Shares may not be tradable in any United States stock exchange or market and it may be necessary for us to list on a foreign exchange in order that our Ordinary Shares can be traded. It is possible that, in the event trading in our stock in the United States is no longer possible, you may lose the entire value of your Ordinary Shares.

On August 26, 2022, the China Securities Regulatory Commission (the “CSRC”), the Ministry of Finance (the “MOF”), and the PCAOB signed the Protocol, governing inspections and investigations of audit firms based in China and Hong Kong. The Protocol remains unpublished and is subject to further explanation and implementation. Pursuant to the fact sheet with respect to the Protocol disclosed by the SEC, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation and has the unfettered ability to transfer information to the SEC.

On December 15, 2022, the PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. However, should PRC authorities obstruct or otherwise fail to facilitate the PCAOB’s access in the future, the PCAOB Board will consider the need to issue a new determination.

On December 29, 2022, the Accelerating Holding Foreign Companies Accountable Act was enacted, which amended the HFCAA by decreasing the number of non-inspection years from three years to two, thus reducing the time period before our Ordinary Shares may be prohibited from trading or delisted.

On May 10, 2023, PCAOB releases 2022 Inspection Reports for mainland China, Hong Kong audit firms. PCAOB stated that the reports show unacceptable rates of Part I.A deficiencies, but it is not unexpected to find such high rates of deficiencies in jurisdictions that are being inspected for the first time and the deficiencies identified by PCAOB staff at the firms in mainland China and Hong Kong are consistent with types and number of findings the PCAOB has encountered in other first-time inspections around the world.

However, uncertainties still exist whether the framework will be fully complied. It remains unclear what the SEC’s implementation process related to the above rules will entail or what further actions the CSRC, the SEC, the PCAOB or Nasdaq will take to address implementation and other issues that may develop and what impact those actions will have on companies that have significant operations in the PRC and have securities listed on a U.S. stock exchange (including a national securities exchange or over-the-counter stock market).

Further, new laws and regulations or changes in laws and regulations in both the United States and China could affect our ability to list our Ordinary Shares on Nasdaq, which could materially impair the market for and market price of our shares.

There may be changes from time to time in the interpretation and enforcement of PRC laws and regulations and changes in policies, rules, and regulations in China, which may be quick with little advance notice, could limit the legal protections available to you and us.

Our PRC subsidiaries are subject to various PRC laws, rules and regulations generally applicable to companies in China. The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past four decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in China.

As relevant laws and regulations are relatively new and the PRC legal system continues to rapidly evolve and may change with little advance notice, the interpretations and enforcement of many laws, regulations and rules are always subject to change. As a result, under certain circumstances, it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. For example, on December 29, 2023, the Standing Committee of the National People’s Congress promulgated the amended PRC Company Law, which will come into effect on July 1, 2024 and supersede the existing PRC Company Law. The amended PRC Company Law provides stricter requirements on capital contribution of a company established in the PRC. According to the amended PRC Company Law, we may be required to fulfill the obligations of capital contribution to our PRC subsidiaries within a much shorter period than the currently effective period. However, since the amended PRC Company Law is still relatively new, there is still uncertainty regarding the implementation and interpretation of the amended PRC Company Law.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business, impede our ability to continue our operations and reduce the value of your investment in Chijet.

Such uncertainties, including the promulgation of new laws, or changes to existing laws or the interpretation or enforcement thereof, could limit the legal protections available to us and our investors, including you.

In light of recent events indicating greater oversight by the Cyberspace Administration of China over cybersecurity, particularly for companies seeking to list on a foreign exchange, we may be subject to a variety of PRC laws and other obligations regarding cybersecurity, data protection and any other rules, and any failure to comply with applicable laws and obligations could have a material and adverse effect on our business.

The Chinese government has recently indicated an intent to exert oversight and control over overseas securities offerings and other capital markets activities and foreign investment in mainland China-based companies like us. The General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions on Strictly Scrutinizing Illegal Securities Activities in Accordance with the Law, which was made available to the public on July 6, 2021. The Opinions emphasized the need to strengthen the administration over illegal securities activities, and the need to strengthen the supervision over overseas listings by Chinese companies. Effective measures, such as promoting the construction of relevant regulatory systems will be taken to deal with the risks and incidents of China-concept overseas listed companies, and cybersecurity and data privacy protection requirements and similar matters.

On November 14, 2021, the Cyberspace Administration of China, or the CAC, released the Network Internet Data Protection Draft Regulations (draft for comments), which reiterates that data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. If a data processor that processes personal data of more than one million users intends to list overseas, it shall apply for a cybersecurity review. In addition, data processors that process important data or are listed overseas shall carry out an annual data security assessment on their own or by engaging a data security services institution, and the data security assessment report for the prior year should be submitted to the local cyberspace affairs administration department before January 31 of each year.

On December 28, 2021, the Measures for Cybersecurity Review (2021 version) was promulgated and became effective on February 15, 2022, and replaced the previous version published on April 13, 2020. According to the Measures for Cybersecurity Review (2021 version), critical information infrastructure operators, or CIIOs, that purchase network products and services, and network platform operators engaging in data processing activities that affect or may affect national security are subject to cybersecurity review. In addition, the relevant regulatory authorities are still entitled to impose security reviews on network products and services that are deemed capable of affecting national security. The network platform operators who possess personal information of more than one million users and intend to be listed at a foreign stock exchange must be subject to the cybersecurity review. CIIOs and network platform operators may voluntarily file for a cybersecurity review with CAC prior to purchasing network products and services if they deem their behavior affects or may affect national security based on self-assessment and self-evaluation. Notwithstanding the voluntary filing, the relevant authorities are entitled to initiate cybersecurity reviews accordingly. We believe that we were not subject to the cybersecurity review in connection with our listing and previous issuance of securities to foreign investors since (i) as companies that engaged in the research and development, production and sales of vehicles, including EVs, we and our subsidiaries are unlikely to be classified as CIIOs under the PRC Cybersecurity Law and the Security Protection Measures on Critical Information Infrastructure promulgated by the State Council on July 30, 2021; and (ii) we and our subsidiaries possess personal information of less than one million users. In addition, although we have not received any regulatory notice that identifies us as a CIIO from any PRC governmental authority, we cannot rule out the possibility that we, or certain of our customers or suppliers, may be deemed as a CIIO. If we are deemed as a CIIO, our purchases of network products or services, if deemed to be affecting or may affect national security, will need to be subject to a cybersecurity review, before we can enter into agreements with relevant customers or suppliers, and before the conclusion of such procedures, these customers will not be allowed to use our offerings or services, and we are not allowed to purchase products or services from our suppliers. As there remains significant uncertainty in the interpretation and enforcement of relevant PRC cybersecurity laws and regulations, we could be subject to cybersecurity review, and if so, we may not be able to pass such review. Any failure or delay in the completion of the cybersecurity review procedures or any other non-compliance with the related laws and regulations may result in fines or other penalties, including suspension of business, website closure, and revocation of prerequisite licenses, as well as reputational damage or legal proceedings or actions against us, which may have material adverse effect on our business, financial condition or results of operations. As of the date of this annual report, we have not been involved in any investigations on cybersecurity review initiated by the CAC or related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect.

The PRC government authorities also further enhanced the supervision and regulation of cross-border data transmission. On July 7, 2022, the CAC issued the Measures for Security Assessment of Cross-border Data Transfers, which took effect on September 1, 2022. Such measures stipulate that data processors who provide overseas the important data collected and generated during operations within the PRC and personal information that shall be subject to security assessment shall conduct a security assessment. On March 22, 2024, the CAC issued Provisions on Facilitating and Regulating Cross-border Data Flows, which provided that data handlers shall identify and declare important data in accordance with relevant rules. In accordance with these provisions, data handlers who provide data abroad, and meet any of the following conditions, are required to declare the outbound data transfer the security assessment to the national cyberspace administration authority through the provincial-level cyberspace administration authority where the data handlers are located: (i) critical information infrastructure operators providing personal information or important data abroad; (ii) data handlers other than critical information infrastructure operator providing important data abroad or cumulatively providing abroad personal information without any sensitive personal information of more than one million individuals or sensitive personal information of more than 10,000 individuals since January 1 of the current year. The assessment results of the data export are valid for three years. In addition, these provisions provide certain exemptions from obligations under the circumstances of cross-border data transfer, including, among others, the obligations for declaring data security assessment, concluding a standard contract for provisions of personal information abroad or passing the certification for personal information protection. As of the date of this annual report, such measures have not materially affected our business or results of operations.

On February 24, 2023, the CSRC, together with other PRC government authorities, released the Provisions on Strengthening the Confidentiality and Archives Administration Related to the Overseas Securities Offering and Listing by Domestic Enterprises (the “Confidentiality and Archives Administration Provisions”), which have come into effect on March 31, 2023. The Confidentiality and Archives Administration Provisions require, among others, that PRC domestic enterprises seeking to offer and list securities in overseas markets, either directly or indirectly, shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of PRC government agencies to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals. It further stipulates that providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and accounting files shall be subject to corresponding procedures in accordance with relevant laws and regulations. We believe that we and our subsidiaries have not and will not provide or publicly disclose documents or materials involving state secrets or work secrets of PRC government agencies or which may adversely affect national security or public interests, to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals. Any failure or perceived failure by us or our subsidiaries to comply with the above confidentiality and archives administration requirements under the Confidentiality and Archives Administration Provisions and other PRC laws and regulations may result in that the relevant entities would be held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime. We cannot assure you, however, that regulators in China will not take a contrary view or will not subsequently require us to undergo the cybersecurity review and subject us to penalties for non-compliance.

As of the date of this annual report, we believe we are in compliance with the regulations or policies that have been issued by the CAC to date in general, with the other subsidiaries in China are not subject to any penalties, fines, suspensions, investigations from any competent authorities for violation of the existing regulations or policies that have been issued by the CAC. There remains uncertainty, however, as to how the regulations or policies issued by the CAC will be interpreted or implemented and whether the CAC may adopt new laws, regulations, rules, or detailed implementation and interpretation. If any such new laws, regulations, rules, or implementation and interpretation come into effect, we will take all reasonable measures and actions to comply and to minimize the adverse effect of such laws on us. Any inability to adequately address cybersecurity and data protection concerns, even if unfounded, or failure to comply with such standards, could result in inquiries and other proceedings or actions against us by governmental authorities, users, consumers or others, such as warnings, fines, penalties, required rectifications and/or other sanctions, as well as negative publicity and damage to our reputation, which could have an adverse effect on our business and results of operations.

Furthermore, the PRC government authorities may strengthen oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers like us. Such actions taken by the PRC government authorities may influence our operations at any time, which are beyond our control. Therefore, any such action may adversely affect our operations and significantly limit or hinder our ability to offer or continue to offer securities to you and cause our securities to significantly decline in value or become worthless.

The CSRC has recently released the Trial Measures for China-based companies seeking to conduct overseas offering and listing in foreign markets. Actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers may significantly limit or completely hinder our ability to offer or continue to offer our Ordinary Shares to investors and could cause the value of our Ordinary Shares to significantly decline or such shares to become worthless.

The Regulations on Mergers of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, require an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. However, substantial uncertainty remains regarding the scope and applicability of the M&A Rules to offshore special purpose vehicles and to the Business Combination (including the offering of Chijet Motor Ordinary Shares to U.S. investors). If CSRC approval under the M&A Rules is required, it is uncertain whether we are able to and how long it will take for us to obtain such approval, and, even if we obtain such CSRC approval, the approval could be rescinded.

On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, which have come into effect on March 31, 2023. The Trial Measures apply to overseas securities offerings and/or listings conducted by (i) companies incorporated in the PRC, or PRC domestic companies, directly and (ii) companies incorporated overseas with operations primarily in the PRC and valued on the basis of interests in PRC domestic companies, or indirect offerings. An equity or equity linked securities offering by an overseas company will be deemed an indirect offering if (i) more than 50% of such overseas company’s consolidated revenues, profit, total assets or net assets that are derived from its audited consolidated financial statements for the most recently completed fiscal year are attributable to PRC domestic companies, and (ii) any of the following three circumstances applies: key components of its operations are carried out in the PRC; its principal places of business are located in the PRC; or the majority of the senior management members in charge of operation and management are PRC citizens or residents. The determination will be made on the basis of “substance over form.” The Trial Measures requires (1) the filings of the overseas offering and listing plan by the PRC domestic companies with the CSRC under certain conditions, and (2) the filing of their underwriters with the CSRC under certain conditions and the submission of an annual report to the CSRC within the required timeline. The Trial Measures further provide that companies that have been listed overseas prior to March 31, 2023 constitute “Existing Issuers” and are not required to conduct the overseas listing filing procedure immediately, but shall carry out filing procedures as required if they conduct secondary or dual primary listing, follow-on offerings, bond offerings or are involved in other circumstances that require filing with the CSRC. Specifically, the filing for a follow-on offering by an issuer conducted in the same overseas market where it has previously offered or listed securities should be submitted to the CSRC within three business days after the completion of such follow-on offering. The filing for subsequent securities offerings and listings of an issuer in other overseas markets than where it has offered and listed should be submitted to the CSRC within three business days after the filing of such issuer’s listing application overseas. Once listed overseas, an issuer is further required to report to the CSRC within three business days after the occurrence of any of the following major events: (i) a change of control of the issuer; (ii) the investigation, sanction or other measures undertaken by foreign securities regulatory agencies or relevant competent authorities with respect to the issuer; (iii) change of listing status or transfer of listing segment; and (iv) the voluntary or mandatory delisting of the issuer. If a PRC company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such PRC company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge and other directly liable persons may also be subject to administrative penalties, such as warnings and fines.

On the same day, the CSRC also held a press conference for the release of the Trial Measures and issued the Notice on Administration for the Filing of Overseas Offering and Listing by Domestic Companies, or the Notice on Overseas Filing, which, among others, clarifies that: (i) on or prior to the effective date of the Trial Measures, the PRC domestic companies that have already submitted valid applications for overseas offering and listing but have not obtained approval from overseas regulatory authorities or stock exchanges may reasonably arrange the timing for submitting their filing applications with the CSRC, and should complete the filing before the completion of their overseas offering and listing; (ii) a six-month transition period will be granted to PRC domestic companies which, prior to the effective date of the Trial Measures, have already obtained the approval from overseas regulatory authorities or stock exchanges (such as the completion of registration in the market of the United States), but have not completed the indirect overseas listing; and follow-on offerings of such companies will need to comply with the Trial Measures.

As our PRC subsidiaries accounted for more than 50% of our consolidated revenues, profit, total assets or net assets for the fiscal years ended December 31, 2022 and 2021, and the key components of our operations are carried out in the PRC, we will be subject to the filing requirements under the Trial Measures with respect to our future follow-on offerings.

The Trial Measures may subject us to additional compliance requirement in the future, and we cannot assure you that we will be able to get the clearance of filing procedures under the Trial Measures on a timely basis, or at all. In addition, if CSRC or other governmental authorities subsequently promulgate new rules or issue explanations mandating that we complete filings or obtain approvals, registrations or other kinds of authorizations for our previous listing and offerings, we cannot assure you that we will be able to obtain such approvals or authorizations, or to complete the required procedures (including filing procedures) or other requirements in a timely manner, or at all, or to obtain any waiver of the aforesaid regulatory requirements if and when procedures are established to obtain such a waiver. Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers or any failure of us to fully comply with new regulatory requirements may significantly limit or completely hinder our ability to offer or continue to offer our Ordinary Shares, cause significant disruption to our business operations, and severely damage our reputation, which would materially and adversely affect our financial condition and results of operations and cause our Ordinary Shares to significantly decline in value or become worthless.

Changes in the political and economic policies of the PRC government or in relations between China and the United States may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

Substantially all of our operations are conducted in the PRC and substantially all of our revenues are sourced from the PRC. Accordingly, our financial condition and results of operations are affected to a significant extent by economic, political and legal developments in the PRC or changes in government relations between China and the United States or other governments. There is certain uncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations and tariffs.

Since July 2021, the PRC government have provided various new guidance on China-based companies raising capital outside of China, including the Opinions on Lawfully and Strictly Cracking Down Illegal Securities Activities, which strengthens the supervision on overseas listings by China-based companies, and the Measures of Cybersecurity Review which requires government-led cybersecurity reviews of certain companies raising capital through offshore entities. In light of such developments, the SEC has imposed enhanced disclosure requirements on China-based companies seeking to register securities with the SEC. As substantially all of our operations are based in China, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising or other activities by China based companies could adversely affect our business and results of operations. If the business environment where we operate deteriorates from the perspective of domestic or international investment, or if relations between China and the United States or other governments deteriorate, our operations and our business, as well as the market price of our Ordinary Shares, may also be adversely affected.

There are certain differences in the business principles, rules and regulations followed by private enterprises compared to state-owned enterprises in carrying out our business work, so FAW Jilin, as a mixed ownership enterprise, may have different degrees of management, development philosophy and cultural integration difficulties in integration, which may in early stages in particular, result in integration challenges to the Company’s operation and management.

Decision-making in state-owned enterprises is often implemented by a reporting and approval mechanism, in terms of major asset transactions or major investment-type decisions, and there is generally a need to follow norms and regulations which are centrally established at all levels, while the corresponding operational processes are subject to the supervision of the state-owned regulatory authorities. As a result, this procedural mechanism largely limits the efficiency of state-owned ownership enterprises.

In contrast to this state-owned enterprise model, the Company in FAW Jilin has established an enterprise system with clear property rights, clear authority and responsibility, separation of government and enterprise, and scientific management – all of which we believe promotes the standardization, efficiency and quality operation of the enterprise. The Company adheres to a scientific-based, corporate governance mechanism and has organized a professional, efficient and coordinated board of directors, and management – each of whose purpose is to serve the business and the Company’s shareholders.

FAW Jilin is a subsidiary of Chijet’s subsidiary Shandong Baoya and has as its other shareholder the state-owned enterprise China FAW, an affiliate of one of the top four automobile manufacturers in China, as described in “Information about Chijet.” The FAW Jilin board of directors is composed of personnel from both Shandong Baoya and China FAW, which not only safeguards the rights and interests of shareholders of each party, but also we believe fully realizes the joint decision making of each party in the management of FAW Jilin, because Shandong Baoya, as a private shareholder, holds more than 70% of the capital shares and has 60% of the board of director seats of FAW Jilin. This company is thereby able to make independent decisions on business strategies, business planning, financial arrangements and management mechanisms within the authorization of its existing articles of association. At the same time, the state-owned shareholders and the state-owned capital supervisory department delegate authorization, decision-making power to the FAW Jilin board of directors, such as strategic planning, selection and employment, total wages, and related matters, while strengthening decision-making gate-keeping assessment and evaluation, risk management and other responsibilities.

The board of directors of FAW Jilin establishes the positioning, development direction, business model, required resources and capabilities, key strategies and development steps of the enterprise from the perspective of FAW Jilin’s strategy, reflecting the status of the restructured and reformed enterprise as a market player and adapting to the needs of the market business with a flexible and we believe possibly more efficient mechanism than a traditional state-owned ownership management structure described above. The differences in managerial approaches between a state-owned enterprise model and a traditional commercial enterprise model may result in integration challenges in melding the models for the business of FAW Jilin, particularly in the early stages of integration. There can be no assurances that the project in a mixed ownership model will be successful, although the Company strongly believes s it will be.

Permissions required for our business from PRC Authorities which have been received to date, but there can be no assurance of future events relating to such permissions.

Several regulatory authorities in China, such as the State Administration for Market Regulation, the National Development and Reform Commission, the Ministry of Industry and Information Technology, and the Ministry of Commerce, oversee different aspects of the electric vehicle business, and our operating entities in China are required to obtain a wide range of government approvals, licenses, permits, and registrations in connection with their operations in China. For example, certain filings must be made by automobile dealers through the information system for the national automobile circulation operated by the relevant commerce department within 90 days after the receipt of a business license. In addition, the PRC government may enact new laws and regulations that require additional licenses, permits, approvals and/or registrations for the operation of any of our existing or future business. As a result, we cannot assure you that we will obtain, maintain or renew all the permits, licenses, registrations and/or approvals covering the sufficient scope of business required for our business in a timely manner or at all.

As of the date of this annual report, we, including our PRC subsidiaries, (i) are not covered by additional requisite permissions or approval requirements from any governmental agency that is required to approve the operations of its PRC subsidiaries which have not already been received, (ii) have received from PRC authorities all requisite licenses, permissions, and approvals that are material for the business operations currently conducted in the PRC, and (iii) no such permission or approval has been denied. Apart from the business licenses held by each of our PRC subsidiaries, the following table provides details on the licenses and permissions held by the PRC subsidiaries.

*According to the National Development and Reform Commission policy, the validity period for the review opinion of an energy-saving report is two years from the date of issuance. Projects that are expected to take longer than two years beyond the estimated completion time stated in the review opinion of an energy-saving report will need to undergo a new energy-saving review.

However, we cannot assure you that any of these entities will be able to receive a renewed opinion or clearance of such compliance requirements in the future in a timely manner, or at all. Any failure of these entities to fully comply with such compliance requirements in the future may cause the PRC subsidiaries to be unable to begin their new businesses or operations in the PRC, subject them to fines, relevant new businesses or operations suspension for rectification, or other sanctions.

As of the date of this annual report, we, including our subsidiaries, (i) are not required to obtain additional material permissions or approvals to operate our current business, and (ii) have not received any warnings or were denied with respect to the application of any requisite permission by any Chinese authorities. However, we cannot assure you that the PRC regulatory agencies, including the CAC or the CSRC, would take the same view as we do, and there is no assurance that the PRC subsidiaries are always able to successfully update or renew the licenses or permits required for the relevant business in a timely manner or that these licenses or permits are sufficient to conduct all of their present or future business. If the PRC subsidiaries (i) do not receive or maintain required permissions or approvals, (ii) inadvertently conclude that such permissions or approvals are not required, or (iii) applicable laws, regulations, or interpretations change and the PRC subsidiaries are required to obtain such permissions or approvals in the future, they could be subject to fines, legal sanctions, or an order to suspend their relevant services, which may materially and adversely affect our financial condition and results of operations and cause our securities to significantly decline in value or become worthless.

Our vehicles are subject to various motor vehicle standards which are continually evolving, and the failure to satisfy such mandated safety standards would have a material adverse effect on our business and operating results.

In China, vehicles must meet or exceed all mandated safety standards. Rigorous testing and the use of approved materials and equipment are among the requirements for achieving such standards. Vehicles must pass various tests and undergo a certification process and be affixed with the China Compulsory Certification, or CCC, before receiving delivery from the factory, being sold, or being used in any commercial activity, and such certification is also subject to periodic renewal. In addition, on August 12, 2021, the Ministry of Industry and Information Technology, or MIIT, issued the Opinion on Strengthening the Access Administration of Intelligent Connected Vehicles Manufacturing Enterprises and Their Products, or the Access Administration Opinion, which provided responsibilities of intelligent connected vehicles manufacturing enterprises, and required such enterprises to strengthen the management of vehicle data security, cyber security, software updates, function safety and intended function safety. The Access Administration Opinion requires vehicles manufacturing enterprises to ensure the compliance of vehicle products with relevant laws, regulations, technical standards and technical specification and file for record with the MIIT prior to over-the-air updates, and shall file with the MIIT in the event of any change to the safety, energy saving, environment protection, anti-theft and other technical parameters and shall ensure conformance by vehicle products and production. Without the approval, no over-the-air update shall be conducted to add or update the autonomous driving function. Failure by us to have any of our vehicle models satisfy motor vehicle standards or any new laws and regulations in China or other markets where our vehicles are to be sold would have a material adverse effect on our business and operating results.

We may be liable for improper use or appropriation of personal information provided by our customers.

Our business involves collecting and retaining certain internal and customer data. We also maintain information about various aspects of our operations as well as regarding our employees. The integrity and protection of our customers, employees and company data is critical to our business. Our customers and employees expect that we will adequately protect their personal information. We are required by applicable laws to keep strictly confidential the personal information that we collect, and to take adequate security measures to safeguard such information.

The PRC Criminal Law, as amended by its Amendment 7 (effective on February 28, 2009) and Amendment 9 (effective on November 1, 2015), prohibits institutions, companies and their employees from selling or otherwise illegally disclosing a citizen’s personal information obtained in performing duties or providing services or obtaining such information through theft or other illegal ways. On November 7, 2016, the Standing Committee of the National People’s Congress, or the SCNPC, issued the Cyber Security Law of the PRC, which became effective on June 1, 2017. Pursuant to the Cyber Security Law of the PRC, network operators must not, without users’ consent, collect their personal information, and may only collect users’ personal information necessary to provide their services. Providers are also obliged to provide security maintenance for their products and services and shall comply with provisions regarding the protection of personal information as stipulated under the relevant laws and regulations.

The Civil Code of the PRC (issued by the PRC National People’s Congress on May 28, 2020 and effective from January 1, 2021) provides legal basis for privacy and personal information infringement claims under the Chinese civil laws. PRC regulators, including the CAC, the MIIT, and the Ministry of Public Security, have been increasingly focused on regulation in data security and data protection.

On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect in November 2021. The Personal Information Protection Law aims at protecting the personal information rights and interests, regulating the processing of personal information, ensuring the orderly and free flow of personal information in accordance with the law and promoting the reasonable use of personal information. The Personal Information Protection Law applies to the processing of personal information within China, as well as certain personal information processing activities outside China, including those for the provision of products and services to natural persons within China or for the analysis and assessment of acts of natural persons within China. As a result, our overseas subsidiaries could potentially become subject to the Personal Information Protection Law. Processors processing personal information exceeding the threshold to be set by the relevant authorities and CIIOs are required to store, within the territory of the PRC, all personal information collected and produced within the PRC. In addition, the Personal Information Protection Law imposes pre-approval and other requirements for any cross-border data transfer by PRC entities. Given the Personal Information Protection Law is still in its infancy, there are uncertainties with respect to its interpretation and application.

The PRC regulatory requirements regarding cybersecurity are evolving. For instance, various regulatory bodies in China, including the CAC, the Ministry of Public Security and the State Administration for Market Regulation (the “SAMR”), have enforced data privacy and protection laws and regulations with varying and evolving standards and interpretations. The Measures for Cybersecurity Review (2021 version) issued by the CAC on November 16, 2021, which became effective on February 15, 2022, includes the following key changes:

On July 7, 2022, the CAC published the Measures for Security Assessment of Cross-border Data Transfers, which became effective on September 1, 2022 and specifies the circumstances in which data processors providing data outbound shall apply for outbound data transfer security assessment with the Cyberspace Administration, including, among others, the data processor provide important information outbound. On March 22, 2024, the CAC issued Provisions on Facilitating and Regulating Cross-border Data Flows, which provided that data handlers shall identify and declare important data in accordance with relevant rules. In accordance with these provisions, data handlers who provide data abroad, and meet any of the following conditions, are required to declare the outbound data transfer security assessment to the national cyberspace administration authority through the provincial-level cyberspace administration authority where the data handlers are located: (i) critical information infrastructure operators providing personal information or important data abroad; (ii) data handlers other than critical information infrastructure operator providing important data abroad or cumulatively providing abroad personal information without any sensitive personal information of more than one million individuals or sensitive personal information of more than 10,000 individuals since January 1 of the current year. The assessment results of the data export are valid for three years. In addition, these provisions provide certain exemptions from obligations under the circumstances of cross-border data transfer, including, among others, the obligations for declaring data security assessment, concluding a standard contract for provisions of personal information abroad or passing the certification for personal information protection. On December 16, 2022, the National Information Security Standardization Technical Committee issued the Practical Guidance on Cybersecurity Standard — the Regulations on Safety Verification in Cross-border Personal Information Processing, which stipulates personal information protection obligations of personal information processor and foreign recipient. However, there remain uncertainties as to the interpretation and application of such measures, if we are deemed to be a data processor providing important data outbound, we could be subject to the outbound data security assessment with national Cyberspace Administration as mentioned above.

On December 8, 2022, the MIIT issued the Administrative Measures for Data Security in the Field of Industry and Information Technology (Trial), or the Data Security Measures in the IT Field, which stipulates that all businesses which handle data in the field of industry and informatization in China are required to categorize such information as “ordinary,” “important” or “core” and businesses processing “important” or “core” data shall comply with certain filing and reporting obligations. Data in the field of industry and informatization includes industrial data, telecoms data and radio data. Data handlers in the field of industry and informatization shall file their catalogues of important data and core data with the local industrial regulatory authorities for the record, shall follow the principles of legality and legitimacy in collecting data and shall not steal or collect data by other illegal means. On October 9, 2023, the MIIT further issued the Implementing Rules for the Risk Assessment of Data Security in the Field of Industry and Information Technology (Trial Implementation) (Draft for Comments), pursuant to which, processors of important data and core data shall complete a data security risk assessment at least once a year under the principles of timeliness, objectivity and effectiveness, produce a true, complete and accurate assessment report, and be held accountable for the assessment results. We face uncertainties as to whether any of our data will be classified as “important” or “core” data and, if so classified, whether any such data can be shared with our overseas subsidiaries.

On June 10, 2021, the SCNPC promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law imposes data security and privacy obligations on entities and individuals carrying out data activities, and introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it will cause to national security, public interests, or legitimate rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, illegally acquired or used. The PRC Data Security Law also provides for a national security review procedure for data activities that may affect national security and imposes export restrictions on certain data an information.

As of the date of this annual report, we have not been involved in any investigations on cybersecurity or privacy and data security initiated by related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect. However, as uncertainties remain regarding the interpretation and implementation of these laws and regulations, we cannot assure you that we will comply with such regulations in all respects and we may be ordered to rectify or terminate any actions that are deemed illegal by regulatory authorities. We may also become subject to fines and/or other sanctions which may have material adverse effect on our business, operations and financial condition.

The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may increase our labor costs, impose limitations on our labor practices and adversely affect our business and our results of operations.

The PRC Labor Law and the Labor Contract Law of the People’s Republic of China (the “Labor Contract Law”) require that employers must execute written employment contracts with full-time employees. All employers must compensate their employees with wages equal to at least the local minimum wage standards. Violations of the PRC Labor Law and the Labor Contract Law may result in the imposition of fines, compensations and other administrative sanctions, and serious violations may constitute criminal offenses.

The Labor Contract Law became effective and was implemented on January 1, 2008, which was amended on December 28, 2012. It has reinforced the protection of employees who, under the PRC Labor Contract Law, have the right, among others, to enter into written labor contracts, to enter into labor contracts with no fixed terms under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts.

In addition, the Labor Contract Law introduces specific provisions related to fixed-term employment contracts, part-time employment, probation, consultation with labor unions and employee assemblies, employment without a written contract, dismissal of employees, severance, and collective bargaining, which together represent enhanced enforcement of labor laws and regulations. For example, according to the PRC Labor Contract Law, an employer is obliged to sign an unfixed-term labor contract with any employee who has worked for the employer for 10 consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unfixed term, with certain exceptions. The employer must pay economic compensation to an employee where a labor contract is terminated or expires in accordance with the PRC Labor Contract Law, except for certain situations which are specifically regulated. In addition, the government has issued various labor-related regulations to further protect the rights of employees. According to such laws and regulations, employees are entitled to annual leave ranging from five to 15 days and are able to be compensated for any untaken annual leave days in the amount of three times their daily salary, subject to certain exceptions. In the event that we decide to change our employment or labor practices, the Labor Contract Law and other labor-related regulation may also limit our ability to effect those changes in a manner that we believe to be cost-effective. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigations, our business and financial conditions may be adversely affected.

Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

Under the applicable regulations and SAFE rules, PRC citizens who participate in an employee stock ownership plan or a stock option plan in an overseas publicly listed company are required to register with SAFE or its local branches and complete certain other procedures. Pursuant to the rules related to stock options by SAFE, participants in a stock incentive plan who are PRC residents must retain a qualified PRC domestic agent, which could be a PRC subsidiary of the overseas publicly listed company or another qualified institution selected by the PRC subsidiary. Such qualified PRC domestic agent must, among other things, file on behalf of such participant an application with SAFE to conduct the SAFE registration with respect to such stock incentive plan and obtain approval for an annual allowance with respect to the purchase of foreign exchange in connection with the exercise or sale of stock options or stock such participant holds. Such participating PRC residents’ foreign exchange income received from the sale of stock and dividends distributed by the overseas publicly listed company must be fully remitted into a PRC collective foreign currency account opened and managed by the PRC agent before distribution to such participants. In addition, the PRC domestic agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan or the PRC domestic agent or any other material changes. We and our PRC resident employees who have been granted stock options or other share-based incentives of ours will be subject to these rules. If we or our PRC resident participants fail to comply with these regulations, we and/or our PRC resident participants may be subject to fines and legal sanctions. In addition, SAT has issued certain circulars concerning employee share options and restricted shares. Under these circulars, our employees working in China who exercise share options and/or are granted restricted shares in the future will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options and/or restricted shares with tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to laws and regulations, we may face sanctions imposed by the tax authorities or other PRC government authorities.

PRC regulations relating to foreign exchange registration of overseas investment by PRC residents may subject our PRC resident beneficial owners of our PRC subsidiary to liability or penalties, limit our ability to inject capital into the subsidiary, limit PRC subsidiary’s ability to increase its registered capital or distribute profits to us, or may otherwise adversely affect us.

On July 4, 2014, the State Administration of Foreign Exchange of the People’s Republic of China, or SAFE, promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the former Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles (generally known as SAFE Circular 75) promulgated by SAFE on October 21, 2005. On February 13, 2015, SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment (“SAFE Circular 13”), which took effect on June 1, 2015. This SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their direct establishment or indirect control of an offshore entity established for the purpose of overseas investment or financing with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests. Qualified local banks will directly examine and accept foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, under Circular 37 from June 1, 2015.

These circulars further require amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease of capital contributed by PRC residents, share transfer or exchange, merger, division or other material events. In the event that a PRC resident holding interests in a special purpose vehicle fails to complete the required SAFE registration, the PRC subsidiary of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, it is unclear how this regulation, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant PRC government authorities, and we cannot predict how these regulations will affect our business operations or future strategy. Failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls. This may have a material adverse effect on our business, financial condition and results of operations.

According to SAFE Circular 37 and SAFE Circular 13, our shareholders or beneficial owners who are PRC residents are subject to Circular 37 or other foreign exchange administrative regulations in respect of their investment in our company. To the best of our knowledge, substantially all of our PRC resident shareholders who directly or indirectly hold shares in our Cayman Islands holding company and who are known to us have completed the application for foreign exchange registrations for their foreign investment in our company in accordance with SAFE Circular 37 and SAFE Circular 13. We have taken steps to notify significant beneficial owners of Ordinary Shares whom we know are PRC residents of their filing obligations. However, we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make such registrations, and we may not always be able to compel them to comply with all relevant foreign exchange regulations. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents will at all times comply with, or in the future make or obtain any applicable registrations or approvals required by all relevant foreign exchange regulations. The failure or inability of such individuals to comply with the registration procedures set forth in these regulations may subject us to fines or legal sanctions, restrictions on our cross-border investment activities or our PRC subsidiary’s ability to distribute dividends to, or obtain foreign-exchange-dominated loans from, our company, or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation have been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future strategy. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

PRC regulation on loans to, and direct investment in, our PRC subsidiary by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of the Business Combination to make loans to or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Chijet is an exempted company incorporated in the Cayman Islands with limited liability structured as a holding company conducting its operations in China through its PRC subsidiary. As permitted under PRC laws and regulations, in utilizing the proceeds of the Business Combination, we may make loans to our PRC subsidiary subject to the approval from governmental authorities and limitation of amount, or we may make additional capital contributions to our PRC subsidiary. Furthermore, loans by us to our PRC subsidiary to finance its activities cannot exceed the statutory limits and are subject to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information System and registration with other governmental authorities in China.

The SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises (“SAFE Circular 19”), effective on June 1, 2015 and last amended on March 23, 2023, in replacement of the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, the Notice from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration of Foreign Exchange Businesses, and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign Exchange Businesses. According to SAFE Circular 19, the flow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of bank loans that have been transferred to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within the PRC, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. Thus, it is unclear whether the SAFE will permit such capital to be used for equity investments in the PRC in actual practice. The SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account (“SAFE Circular 16”), effective on June 9, 2016 and last amended on December 4, 2023, which reiterates some of the rules set forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to grant loans to non-associated enterprises. Violations of SAFE Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from the Business Combination, to our PRC subsidiary, which may adversely affect our liquidity and our ability to fund and expand our business in the PRC. On October 23, 2019, SAFE promulgated the Circular of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or SAFE Circular 28, as amended on December 4, 2023, which permits non-investment FIEs to use their capital funds to make equity investments in the PRC, with genuine investment projects and in compliance with effective foreign investment restrictions and other applicable laws.

In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, the PRC subsidiary by offshore holding companies, and the fact that the PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiary or with respect to future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from the Business Combination and any offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC enterprise shareholders and has a material adverse effect on our results of operations and the value of your investment.

Under the PRC Enterprise Income Tax Law (“EIT Law”), that became effective in January 2008 and was amended in February 2017 and December 2018, as well as its implementing rules, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, a circular, known as SAT Circular 82, issued in April 2009 by the State Administration of Taxation (the “SAT”), specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin, known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore incorporated resident enterprises.” SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters. Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals.

We do not believe that we, as an exempted company incorporated in the Cayman Islands with limited liability meet all of the conditions above thus we do not believe that we are a PRC resident enterprise, though all members of our management team as well as the management team of our offshore holding company are located in China. However, if the PRC tax authorities determine that we are a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we will be subject to the uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”

Finally, since there remain uncertainties regarding the interpretation and implementation of the EIT Law and its implementation rules, it is uncertain whether, if we are regarded as a PRC resident enterprise, any dividends payable by us to our investors and gains on the sale of our shares would become subject to PRC withholding tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (subject to the provisions of any applicable tax treaty). It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in our ordinary shares.

There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify for certain treaty benefits.

Chijet is an exempted company incorporated in the Cayman Islands with limited liability structured as a holding company. We may need dividends and other distributions on equity from our PRC subsidiary to satisfy our liquidity requirements. Pursuant to the EIT Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC “resident enterprise” to a foreign enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment. Pursuant to a special arrangement between Hong Kong and China, such rate may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. WFOE is 100% owned by Baoyaev Group Limited. Accordingly, Baoyaev Group Limited may qualify for a 5% tax rate in respect of distributions from WFOE when it becomes operational and is not obligated to pay more than 50% of the income in twelve months to residents in third country or region. Under the Notice of the State Administration of Taxation on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the taxpayer needs to satisfy certain conditions to utilize the benefits under a tax treaty. These conditions include: (1) the taxpayer must be the beneficial owner of the relevant dividends, and (2) the corporate shareholder to receive dividends from the PRC subsidiary must have continuously met the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, under Announcement of the State Administration of Taxation on Issues Relating to “Beneficial Owner” in Tax Treaties, which took effect on April 1, 2018, a “Beneficial Owner” shall mean a person who has ownership and control over the income and the rights and property from which the income is derived. To determine the “beneficial owner” status of a resident of the treaty counterparty who needs to take advantage of the tax treaty benefits, a comprehensive analysis shall be carried out, taking into account actual conditions of the specific case.

Entitlement to a lower tax rate on dividends according to tax treaties or arrangements between the PRC central government and governments of other countries or regions is subject to Announcement of State Taxation Administration on Promulgation of the Administrative Measures on Non-resident Taxpayers Enjoying Treaty Benefits (“Circular 35”). Circular 35 provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. As a result, we cannot assure you that our determination regarding our qualification to enjoy the preferential tax treatment will not be challenged by the relevant PRC tax authority or we will be entitled to any preferential withholding tax rate under tax treaties for dividends received from WFOE.

Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises (“SAT Circular 698”) issued by the SAT on December 10, 2009, where a foreign investor transfers the equity interests of a resident enterprise indirectly via disposition of the equity interests of an overseas holding company, or an “indirect transfer,” and such overseas holding company is located in a tax jurisdiction that (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor shall report the indirect transfer to the competent tax authority. The PRC tax authority will examine the true nature of the indirect transfer, and if the tax authority considers that the foreign investor has adopted an “abusive arrangement” in order to avoid PRC tax, it may disregard the existence of the overseas holding company and re-characterize the indirect transfer.

On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises (“SAT Bulletin 7”), to supersede existing provisions in relation to the “indirect transfer” as set forth in SAT Circular 698, while the other provisions of SAT Circular 698 remain in force. Pursuant to SAT Bulletin 7, where a non-resident enterprise indirectly transfers properties such as equity in PRC resident enterprises without any justifiable business purposes and aiming to avoid the payment of enterprise income tax, such indirect transfer must be reclassified as a direct transfer of equity in PRC resident enterprises. To assess whether an indirect transfer of PRC taxable properties has reasonable commercial purposes, all arrangements related to the indirect transfer must be considered comprehensively and factors set forth in SAT Bulletin 7 must be comprehensively analyzed in light of the actual circumstances. SAT Bulletin 7 also provides that, where a non-PRC resident enterprise transfers its equity interests in a resident enterprise to its related parties at a price lower than the fair market value, the competent tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-resident Enterprises as Source (“SAT Bulletin 37”), which repealed the entire SAT Circular 698 and the provision in relation to the time limit for the withholding agent to declare to the competent tax authority for payment of such tax of SAT Bulletin 7. Pursuant to SAT Bulletin 37, the income from a property transfer, as stipulated in the second item under Article 19 of the EIT Law, shall include the income derived from transferring such equity investment assets as stock equity. The balance of deducting the equity’s net value from the total income from equity transfer shall be taxable income from equity transfer. Where a withholding agent enters into a business contract, involving the income specified in the third paragraph of Article 3 in the EIT Law, with a non-resident enterprise, the tax-excluding income of the non-resident enterprise will be treated as the tax-including income, based on which the tax payment will be calculated and remitted, if it is agreed in the contract that the withholding agent shall assume the tax payable.

We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries or investments. Our Company may be subject to filing obligations or taxed or subject to withholding obligations in such transactions, under SAT Bulletin 7 and SAT Bulletin 37. It is possible that we or our non-PRC resident investors may become at risk of being taxed under SAT Bulletin 7 and SAT Bulletin 37 and may be required to expend valuable resources to comply with SAT Bulletin 7 and SAT Bulletin 37 or to establish that we or our non-PRC resident investors should not be taxed under SAT Bulletin 7 and SAT Bulletin 37, which may have an adverse effect on our financial condition and results of operations or such non-PRC resident investors’ investment in us.

Dividends payable to our foreign investors and gains on the sale of our Ordinary Shares by our foreign investors may be subject to PRC tax.

Under the EIT Law and its implementation regulations issued by the State Council, a 10% PRC withholding tax is applicable to dividends payable to investors that are non-resident enterprises, which do not have an establishment or place of business in the PRC or which have such establishment or place of business but the dividends are not effectively connected with such establishment or place of business, to the extent such dividends are derived from sources within the PRC. Any gain realized on the transfer of Ordinary Shares by such investors is also subject to PRC tax at a current rate of 10% which in the case of dividends will be withheld at source if such gain is regarded as income derived from sources within the PRC. If we are deemed a PRC resident enterprise, dividends paid on our Ordinary Shares, and any gain realized from the transfer of our Ordinary Shares, may be treated as income derived from sources within the PRC and may as a result be subject to PRC taxation. See*“Regulation — Regulations Relating to Taxation.*” Furthermore, if we are deemed a PRC resident enterprise, dividends payable to individual investors who are non-PRC residents and any gain realized on the transfer of Ordinary Shares by such investors may be subject to PRC tax at a current rate of 20%. Any PRC tax liability may be reduced under applicable tax treaties. However, it is unclear whether holders of our Ordinary Shares would be able to claim the benefit of income tax treaties or agreements entered into between China and other countries or areas if we are considered a PRC resident enterprise. If dividends payable to our non-PRC investors, or gains from the transfer of our Ordinary Shares by such investors are subject to PRC tax, the value of your investment in our Ordinary Shares may decline significantly.

We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and the PRC subsidiary’s restrictions on paying dividends or making other payments to us could restrict our ability to satisfy our liquidity requirements and have a material and adverse effect on our ability to conduct our business.

Chijet is an exempted company incorporated in the Cayman Islands with limited liability structured as a holding company. We may need dividends and other distributions on equity from our PRC subsidiary to satisfy our liquidity requirements, including the funds necessary to pay dividends and other cash distributions to shareholders and service, any debt Chijet may incur. Our PRC subsidiary in the PRC generates and retain cash generated from operating activities and re-invest it in our business. Current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiary is required to set aside at least 10% of its accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. Our PRC subsidiary may also allocate a portion of its after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. Furthermore, if our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. Any limitation on the ability of our PRC subsidiary to distribute dividends or to make payments to us may restrict our ability to satisfy our liquidity requirements.

In addition, the PRC government may strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by SAFE for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC subsidiary to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Failure to obtain or maintain any of the preferential tax treatments or imposition of any additional taxes and surcharges could adversely affect our financial condition and results of operations.

Under the EIT Law and its implementation rules, the statutory enterprise income tax rate is 25%, but certain “software enterprise” and “high and new technology enterprises” are qualified for a preferential enterprise income tax rates subject to certain qualification criteria. A “high and new technology enterprise,” which is reassessed every three years, is entitled to favorable income tax rate of 15%. In 2021, our subsidiary, Shandong Baoya New Energy Vehicle Co., Ltd., which we refer to as Shandong Baoya, obtained qualification as a “high and new technology enterprise” and is entitled to enjoy a preferential income tax rate of 15% for the calendar years from 2021 to 2024. However, if it fails to maintain its qualified status, experiences any increase in the enterprise income tax rate, or faces any discontinuation, retroactive or future reduction or refund of any of the preferential tax treatments currently enjoyed, our business, financial condition and results of operations could be materially and adversely affected.

Further, in the ordinary course of our business, we are subject to complex income tax and other tax regulations, and significant judgment is required in the determination of a provision for income taxes. Although we believe our tax provisions are reasonable, if the PRC tax authorities successfully challenge our position and we are required to pay tax, interest and penalties in excess of our tax provisions, our financial condition and results of operations would be materially and adversely affected.

Fluctuations in exchange rates could result in foreign currency exchange losses to us and may reduce the value of, and amount in U.S. Dollars of dividends payable on, our shares in foreign currency terms and could impact our gross profit and gross margin.

The value of the RMB and the Hong Kong dollar against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. In August 2015, the PBOC, changed the way it calculates the mid-point price of RMB against the U.S. dollar, requiring the market-makers who submit for reference rates to consider the previous day’s closing spot rate, foreign-exchange demand and supply as well as changes in major currency rates. It is difficult to predict how market forces or PRC or U.S. government policy, including any interest rate increases by the Federal Reserve, may impact the exchange rate between the RMB and the U.S. dollar in the future. There remains significant international pressure on the PRC government to adopt a more flexible currency policy, including from the U.S. government, which has threatened to label China as a “currency manipulator,” which could result in greater fluctuation of the RMB against the U.S. dollar. However, the PRC government may still at its discretion restrict access to foreign currencies for current account transactions in the future. Therefore, it is difficult to predict how market forces or government policies may impact the exchange rate between the RMB and the U.S. dollar or other currencies in the future. In addition, the PBOC may take measures in the foreign exchange market to limit fluctuations in RMB exchange rates and achieve policy goals. If the exchange rate between RMB and U.S. dollar fluctuates in unanticipated manners, our results of operations and financial condition, and the value of, and dividends payable on, our shares in foreign currency terms may be adversely affected. We may not be able to pay dividends in foreign currencies to our shareholders. Appreciation of RMB to U.S. dollar will result in foreign currency translation gain, while depreciation of RMB to U.S. dollar will result in foreign currency translation loss.

Restrictions on currency exchange may limit our ability to utilize our revenues effectively.

All of our revenues are denominated in Renminbi. The Renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and loans, including loans we may secure from our onshore subsidiaries. Currently, our WFOE may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, without the approval of SAFE by complying with certain procedural requirements. However, the relevant PRC governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. Since we expect a significant portion of our future revenue will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in Renminbi to fund our business activities outside of the PRC or pay dividends in foreign currencies to our shareholders. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant PRC governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our subsidiaries.

It may be difficult for overseas shareholders and/or regulators to conduct investigation or collect evidence within China.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC without first receiving approval from the CSRC. While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests. On February 24, 2023, the CSRC published the Confidentiality and Archives Administration Provisions, pursuant to which, the working papers and other files produced in the PRC by securities companies and securities service institutions that provide PRC domestic companies with relevant securities services during the overseas securities offering and listing by such domestic companies shall be stored in PRC. If overseas securities regulators propose to carry out investigation, evidence collection or inspection on domestic companies, or relevant securities companies or securities service institutions, such activities shall be carried out through the cross-border regulatory cooperation mechanism. The domestic companies, securities companies and securities service institutions shall obtain approvals from the CSRC or relevant PRC authorities before cooperating with overseas securities regulators in their investigations and inspections or providing materials to them. In addition, the Data Security Law and the Personal Information Protection Law provide that no entity or individual within the territory of the PRC shall provide any foreign judicial body and law enforcement body with any data or any personal information stored within the territory of the PRC without the approval of the competent governmental authority of the PRC. In the event that the U.S. securities regulatory agencies carry out any investigation on us and there arises a need to conduct an investigation or collect evidence within the territory of China, the U.S. securities regulatory agencies may not be able to carry out such investigation or evidence collection directly in China under PRC laws. In addition, we and certain other entities and individuals, including our legal advisors, auditors and other agents, may be restricted from providing documents, materials, data and/or personal information to the U.S. securities regulatory agencies before obtaining appropriate approvals from relevant PRC authorities. We may be subject to penalties if we or such other entities or individuals are found to have violated the foregoing restrictions. The U.S. securities regulatory agencies may resort to cross-border cooperation with the securities regulatory authority of China through judicial assistance, diplomatic channels or regulatory cooperation mechanisms in place involving the securities regulatory authority of China. If the U.S. securities regulatory agencies are unable to conduct such investigations, there exists a risk that they may determine to suspend or de-register our registration with the SEC and may also delist our securities from trading market within the United States.

To the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

Chijet is an offshore holding company with no material operations of its own and conducts substantially all of its operations through its PRC subsidiary. As of the date of this annual report, substantially all of our cash and assets are located in the PRC. As a holding company, Chijet may rely on dividends and other distributions on equity paid by its PRC subsidiary for its cash and financing requirements. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to us. We are in the process of adopting our formal cash management policies which will dictate the purpose, amount and procedure of cash transfers among our holding company and subsidiaries. Historically, one PRC operating entity provides financial support for other entities’ operations by inter-company loans and we have not experienced difficulties or limitations on our ability to transfer cash between subsidiaries. Among Chijet and its subsidiaries, cash is transferred from Chijet and Baoyaev Group Limited as needed in the form of capital contributions or working capital loans, as the case may be, to the PRC subsidiary as we are permitted under PRC laws and regulations to provide funding to our PRC subsidiary only through loans or capital contributions, and only if we satisfy the applicable government registration and approval requirements. We believe that there is no restriction imposed by the Hong Kong government on the transfer of capital within, into and out of Hong Kong (including funds from Hong Kong to the PRC), except transfer of funds involving money laundering and criminal activities. However, to the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets. As of the date of this annual report, no transfers, dividends or other distributions have been made to date from our subsidiaries to our holding company nor have we or any of our subsidiaries ever paid dividends or made distributions to U.S. investors to date.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to transfer cash out of China, and pay dividends in foreign currencies to our shareholders. Therefore, to the extent cash or assets in our business are in the PRC or Hong Kong or a PRC or Hong Kong entity, the funds or assets may not be available to fund operations or for other use outside of the PRC or Hong Kong due to interventions in or the imposition of restrictions and limitations on the ability of our company and our subsidiaries by the PRC government to transfer cash or assets, which may materially and adversely affect our business, financial condition and results of operations and may result in our inability to sustain our growth and expansion strategies.

Notwithstanding the foregoing, there can be no assurance that the PRC government will not impose restrictions in future on our ability to transfer or distribute cash within our PRC subsidiary or to foreign investors, which could result in an inability or prohibition on making transfers or distributions outside of China and may adversely affect our business, financial condition and results of operations.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based on foreign laws.

Chijet is an exempted company incorporated under the laws of the Cayman Islands. We conduct substantially all of our production and sales in China, and substantially all of our assets are located in China. In addition, our executive officers and certain directors are PRC nationals and reside within China for a significant portion of the time. The PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States, the United Kingdom, Japan and many other jurisdictions. As a result, it may not be possible for investors to serve process upon us or those persons in China, or to enforce against us or them in China, any judgments obtained from non-PRC jurisdictions. As a result, it may be difficult for you to effect service of process upon us or those persons inside mainland China. It may also be difficult for you to enforce judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors who do not reside in the United States or have substantial assets located in the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.

Shareholder claims that are common in the United States, including securities law class actions and fraud claims, generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to obtaining information needed for shareholder investigations or litigation outside China or otherwise with respect to foreign entities. Although the local authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such regulatory cooperation with the securities regulatory authorities in the United States has not been efficient in the absence of mutual and practical cooperation mechanism. According to Article 177 of the PRC Securities Law which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the PRC. Accordingly, without the consent of the competent PRC securities regulators or other relevant authorities, no entity or individual may provide any documents and materials relating to securities business activities to foreign entities or government agencies. As such, there are also uncertainties as to the procedures and requisite timing for the oversea securities regulatory agencies to conduct investigations and collect evidence within the territory of the PRC.

The tension in international trade and rising political tension may adversely impact our business, financial condition, and results of operations.

The tension in international trade and rising political tension may adversely impact our business, results of operations, financial condition and prospects. These frictions may increase costs for certain technology and components critical to our business, complicate cross-border data flows and services, and pose risks to global supply chains. A prolonged trend toward economic nationalism may also broadly dampen growth in the global economy, undermining business investment and demand for our products and services. Specifically, our ability to operate and expand depends on stable global political and economic conditions. Any disruptions to the international relations could slow down the overall economy and introduce regulatory and operational uncertainties to our business. Changes in the global political and economic environment could post strategic, operational and economic risks that may have a material adverse effect on our operations.

Risks Related to Ownership of Chijet Motor Ordinary Shares

We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002.

We are required to provide management’s attestation on internal controls. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act of 2002 are significantly more stringent than those required of Chijet prior to the Business Combination as a privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the regulatory compliance and reporting requirements that will be applicable to us. If we are not able to implement the additional requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our Ordinary Share.

The requirements of being a public company may strain our resources and divert management’s attention.

As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, the listing requirements of Nasdaq and other applicable securities rules and regulations. Compliance with these rules and regulations will increase the legal and financial compliance costs of ours, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources, particularly after it is no longer an “emerging growth company.” The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results. We may need to hire more employees in the future or engage outside consultants to comply with these requirements, which will increase its costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely affected.

If we are characterized as a passive foreign investment company for U.S. federal income tax purposes, our U.S. shareholders may suffer adverse tax consequences.

If we are a passive foreign investment company (“PFIC”) for any taxable year (or portion thereof) that is included in the holding period of a U.S. holder of Chijet Motor Ordinary Shares, the U.S. holder may be subject to adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. Chijet Motor’s PFIC status for its current and subsequent taxable years may depend on its unbooked goodwill as valued based on the projected market value of its equity and whether it qualifies for the PFIC start-up exception. Depending on the particular circumstances, the application of the start-up exception may be subject to uncertainty, and there cannot be any assurance that we will qualify for the start-up exception. Accordingly, there can be no assurances with respect to our status as a PFIC for our current taxable year or any subsequent taxable year. Our actual PFIC status for any taxable year, however, will not be determinable until after the end of such taxable year. Please see the section of this annual report entitled “Taxation—Certain Material U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Rules” for a more detailed discussion with respect to Chijet Motor’s potential PFIC status. U.S. holders are urged to consult their tax advisors regarding the possible application of the PFIC rules to holders of Chijet Motor Ordinary Shares.

The IRS may not agree that we should be treated as a non-U.S. corporation for U.S. federal income tax purposes.

Although we are incorporated and tax resident in the Cayman Islands, the IRS may assert that we should be treated as a U.S. corporation for U.S. federal income tax purposes pursuant to Section 7874 of the Code. For U.S. federal income tax purposes, a corporation is generally considered a U.S. “domestic” corporation if it is created or organized in or under the laws of the U.S., any state thereof, or the District of Columbia. Because we are not so created or organized (but are instead incorporated only in the Cayman Islands), we would generally be classified as a foreign corporation (that is, a corporation other than a U.S. “domestic” corporation) under these rules. Section 7874 of the Code provides an exception under which a corporation created or organized under foreign law may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes.

As more fully described in the section titled “Taxation—Certain Material U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Treatment of Chijet Motor — Tax Residence of Chijet Motor for U.S. Federal Income Tax Purposes,” based on the terms of the Business Combination, the rules for determining share ownership under Code Section 7874 and the Treasury regulations promulgated under Code Section 7874 (the “Section 7874 Regulations”), and certain factual assumptions, we are not currently expected to be treated as a U.S. corporation for U.S. federal income tax purposes under Code Section 7874 after the Business Combination. However, the application of Section 7874 of the Code is complex, is subject to detailed regulations (the application of which is uncertain in various respects and would be impacted by changes in such U.S. tax laws and regulations with possible retroactive effect), and is subject to certain factual uncertainties. Accordingly, there can be no assurance that the IRS will not challenge our status as a foreign corporation under Code Section 7874 or that such challenge would not be sustained by a court.

If the IRS were to successfully challenge under Code Section 7874 our status as a foreign corporation for U.S. federal income tax purposes, we and certain shareholders of ours could be subject to significant adverse tax consequences, including a higher effective corporate income tax rate on us and future withholding taxes on certain of our shareholders, depending on the application of any income tax treaty that might apply to reduce such withholding taxes. In particular, holders of Chijet Motor Ordinary Shares would be treated as holders of stock of a U.S. corporation.

See “Taxation—Certain Material U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Treatment of Chijet Motor — Tax Residence of Chijet Motor for U.S. Federal Income Tax Purposes” for a more detailed discussion of the application of Code Section 7874 to the Business Combination. Investors in our company should consult their own advisors regarding the application of Code Section 7874 to the Business Combination.

Code Section 7874 may increase our U.S. affiliates’ U.S. taxable income or have other adverse consequences to us and our shareholders.

Following the acquisition of a U.S. corporation by a foreign corporation, Code Section 7874 can limit the ability of the acquired U.S. corporation and its U.S. affiliates to use U.S. tax attributes (including net operating losses and certain tax credits) to offset U.S. taxable income resulting from certain transactions, as well as result in certain other adverse tax consequences, even if the acquiring foreign corporation is respected as a foreign corporation for purposes of Code Section 7874. In general, if a foreign corporation acquires, directly or indirectly, substantially all of the properties held directly or indirectly by a U.S. corporation, and after the acquisition the former shareholders of the acquired U.S. corporation hold at least 60% (by either vote or value) but less than 80% (by vote and value) of the shares of the foreign acquiring corporation by reason of holding shares in the acquired U.S. corporation, subject to other requirements, certain adverse tax consequences under Section 7874 of the Code may apply.

If these rules apply to the Business Combination, we and certain of our shareholders may be subject to adverse tax consequences including, but not limited to, restrictions on the use of tax attributes with respect to “inversion gain” recognized over a 10-year period following the transaction, disqualification of dividends paid from preferential “qualified dividend income” rates and the requirement that any U.S. corporation owned by us include as “base erosion payments” that may be subject to a minimum U.S. federal income tax any amounts treated as reductions in gross income paid to certain related foreign persons. Furthermore, certain “disqualified individuals” (including officers and directors of a U.S. corporation) may be subject to an excise tax on certain stock-based compensation held thereby at a rate of 20%.

As more fully described in the section titled “Taxation—Certain Material U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Treatment of Chijet Motor — Utilization of JWAC’s Tax Attributes and Certain Other Adverse Tax Consequences to Chijet Motor and Chijet Motor’s Shareholders,” based on the terms of the Business Combination, the rules for determining share ownership under Section 7874 of the Code and the Section 7874 Regulations (as defined in “Taxation—Certain Material U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Treatment of Chijet Motor — Tax Residence of Chijet Motor for U.S. Federal Income Tax Purposes”), and certain factual assumptions, we are not currently expected to be subject to these rules under Code Section 7874 after the Business Combination. The above determination, however, is subject to detailed regulations (the application of which is uncertain in various respects and would be impacted by future changes in such U.S. Treasury regulations, with possible retroactive effect) and is subject to certain factual uncertainties. Accordingly, there can be no assurance that the IRS will not challenge whether we are subject to the above rules or that such a challenge would not be sustained by a court.

However, even if we are not subject to the above adverse consequences under Section 7874, we may be limited in using our equity to engage in future acquisitions of U.S. corporations over a 36-month period following the Business Combination. If we were to be treated as acquiring substantially all of the assets of a U.S. corporation within a 36-month period after the Business Combination, the Section 7874 Regulations would exclude certain shares of ours attributable to the Business Combination for purposes of determining the Section 7874 Percentage (as defined in “Taxation—Certain Material U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Treatment of Chijet Motor — Tax Residence of Chijet Motor for U.S. Federal Income Tax Purposes”) of that subsequent acquisition, making it more likely that Code Section 7874 will apply to such subsequent acquisition.

See “Taxation—Certain Material U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Treatment of Chijet Motor — Utilization of JWAC’s Tax Attributes and Certain Other Adverse Tax Consequences to Chijet Motor and Chijet Motor’s Shareholders” for a more detailed discussion of the application of Code Section 7874 to the Business Combination. Investors in our company should consult their own advisors regarding the application of Code Section 7874 to the Business Combination.

We are an “emerging growth company” and it cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make its shares of common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. Additionally, as an emerging growth company, we elected to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As such, the financial statements of Chijet Motor may not be comparable to companies that comply with public company effective dates. It cannot be predicted if investors will find Chijet Motor Ordinary Shares less attractive because we may rely on these exemptions. If some investors find Chijet Motor Ordinary Shares less attractive as a result, there may be a less active trading market for Chijet Motor Ordinary Shares and its share price may be more volatile.

The future exercise of registration rights may adversely affect the market price of Chijet Motor Ordinary Shares.

In connection with the Business Combination Agreement, Chijet Motor, JWAC, JWAC Sponsor and other persons and entities entered into an amended and restated registration rights agreement. Pursuant to such agreement, Chijet Motor is obligated to file a registration statement to register the resale of Chijet Motor Ordinary Shares issued in connection with the Business Combination to specified equity holders of Chijet and JWAC. The agreement also provides these persons with demand and “piggy-back” registration rights as to their Chijet Motor Ordinary Shares, subject to certain minimum requirements and customary conditions. See “Shares Eligible for Future Sale” for further details. The presence of these additional Chijet Motor Ordinary Shares trading in the public market may have an adverse effect on the market price of Chijet Motor’s securities. Additionally, the Chijet Holders are being granted piggy-back registration rights under the transmittal letters for any shares that may be issued to them by Chijet Motor under the Business Combination Agreement after the Closing for purchase price adjustments or indemnification claims.

Future resales of Chijet Motor Ordinary Shares issued in connection with the Business Combination may cause the market price of Chijet Motor Ordinary Shares to drop significantly, even if Chijet Motor’s business is doing well.

JWAC’s Sponsor, officers and directors have agreed in a lock-up agreement not to transfer, assign or sell any of JWAC Class B Common Stock (except to certain permitted transferees) until the earlier of (i) six months after the date of the consummation of a Business Combination, (ii) the date on which the closing price of Chijet Motor Ordinary Shares equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period from the Closing until such six months after a Business Combination or (iii) if, earlier, the date Chijet Motor consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of Chijet Motor’s shareholders having the right to exchange their ordinary shares for cash, securities or other property.

Upon expiration of the applicable lock-up periods, and in accordance with Rule 144 under the Securities Act, such shareholders may sell large amounts of Chijet Motor Ordinary Shares in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in the trading price of Chijet Motor Ordinary Shares or putting significant downward pressure on the price of Chijet Motor Ordinary Shares. Further, sales of Chijet Motor Ordinary Shares upon expiration of the applicable lock-up period could encourage short sales by market participants. Generally, short selling means selling a security, contract or commodity not owned by the seller. The seller is committed to eventually purchase the financial instrument previously sold. Short sales are used to capitalize on an expected decline in the security’s price. Short sales of Chijet Motor Ordinary Shares could have a tendency to depress the price of Chijet Motor Ordinary Shares, which could increase the potential for short sales.

We cannot predict the size of future issuances of Chijet Motor Ordinary Shares or the effect, if any, that future issuances and sales of Chijet Motor Ordinary Shares will have on the market price of Chijet Motor Ordinary Shares. Sales of substantial amounts of Chijet Motor Ordinary Shares (including those shares issued in connection with the Business Combination), or the perception that such sales could occur, may adversely affect prevailing market prices of Chijet Motor Ordinary Shares.

The market price of Chijet Motor’s securities may decline.

The market values of the Chijet Motor Ordinary Shares may vary significantly. Fluctuations in the price of Chijet Motor’s securities could contribute to the loss of all or part of your investment. Prior to the Business Combination, there has not been a public market for the Chijet Motor Ordinary Shares. Accordingly, the valuation ascribed to Chijet Motor may not be indicative of the price that will prevail in the trading market following the Business Combination. The trading price of Chijet Motor’s securities following the Business Combination has been volatile and subject to wide fluctuations in response to various factors, some of which are beyond Chijet Motor’s control. Any of the factors listed below could have a material adverse effect on your investment in Chijet Motor’s securities and Chijet Motor’s securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of Chijet Motor’s securities may not recover and may experience a further decline.

Factors affecting the trading price of Chijet Motor’s securities may include:

Broad market and industry factors may materially harm the market price of Chijet Motor’s securities irrespective of Chijet Motor’s operating performance. Particularly since the onset of the COVID-19 pandemic, global stock markets in general, and Nasdaq in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of Chijet Motor’s securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to Chijet Motor could depress Chijet Motor’s share price regardless of Chijet Motor’s business, prospects, financial conditions or results of operations. A decline in the market price of Chijet Motor’s securities also could adversely affect Chijet Motor’s ability to issue additional securities and Chijet Motor’s ability to obtain additional financing in the future.

Nasdaq may delist our securities from trading on its exchange.

Our ordinary share is currently listed on the Nasdaq Global Market, however, we cannot assure you that our securities will continue to be listed on Nasdaq in the future. On January 23, 2024, we received a deficiency notice from the Nasdaq Stock Market LLC, notifying us that our listed securities did not maintain the minimum bid price requirement of $1.00 per ordinary share for continued listing on the Nasdaq Global Market for a period of 30 consecutive business days as required under Nasdaq listing rules.

In accordance with Nasdaq’s Listing Rule 5810(c)(3)(A), we had a period of 180 calendar days, or until July 22, 2024 (the “Compliance Period”), to regain compliance with the minimum closing bid price requirement. If at any time during the Compliance Period, our ordinary shares had a closing bid price of at least $1.00 for 10 consecutive business days, Nasdaq would have provided us a written confirmation of compliance and the matter would have been closed. In the event we do not regain compliance by July 22, 2024, we may be eligible for an additional 180 calendar day period to regain compliance. To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Global Market, except for the bid price requirement. We would also be required to provide written notice to Nasdaq of our intent to cure the deficiency during this second compliance period, by effecting a reverse share split, if necessary. If it appears to the Nasdaq staff that we will not be able to cure the deficiency or if we are otherwise not eligible, Nasdaq would provide notice to us that our ordinary shares would be subject to delisting. At that time, we may appeal the Nasdaq staff’s delisting determination to a Nasdaq Hearings Panel.

The inability to comply with Nasdaq’s initial or continued requirements or standards, as applicable, could result in the delisting of our ordinary share, which could have a material adverse effect on our financial condition and could cause the value of the ordinary share to decline. If our ordinary share were to be delisted from trading on the Nasdaq and the trading price of our ordinary share were below $5.00 per share on the date the ordinary share is delisted, trading in our ordinary share would also be subject to the requirements of certain rules promulgated under the Exchange Act. These rules require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a “penny stock” and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors, generally institutions. These additional requirements may discourage broker-dealers from effecting transactions in securities that are classified as penny stocks, which could severely limit the market price and liquidity of such securities and the ability of purchasers to sell such securities in the secondary market. A penny stock is defined generally as any non-exchange listed equity security that has a market price of less than $5.00 per share, subject to certain exceptions.

Anti-takeover provisions contained in our Charter, as well as provisions of Cayman Islands law, could impair a takeover attempt and limit the price investors might be willing to pay in the future for the Chijet Motor Ordinary Shares and could entrench management.

Our Charter contains anti-takeover provisions under Cayman Islands law, which could delay or prevent a change of control. These provisions may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for Chijet Motor’s securities.

Our authorized but unissued shares are available for future issuances without shareholder approval and could be utilized for a variety of corporate purposes, including future offerings to raise additional capital, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved ordinary shares could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

Concentration of ownership among our existing executive officers, directors and their affiliates may prevent new investors from influencing significant corporate decisions.

Our executive officers, directors and their affiliates as a group beneficially own approximately 71.4% of outstanding Chijet Motor Ordinary Shares. As a result, these shareholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, any amendment of our Charter and approval of significant corporate transactions. This control could have the effect of delaying or preventing a change of control or changes in management and will make the approval of certain transactions difficult or impossible without the support of these shareholders.

We do not expect to declare any dividends in the foreseeable future.

We do not anticipate declaring any cash dividends to holders of its common stock in the foreseeable future. Consequently, investors may need to rely on sales of their shares after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

Our business and stock price may suffer as a result of our lack of public company operating experience and if securities or industry analysts do not publish or cease publishing research or reports about us, our business, or our market, or if they change their recommendations regarding Chijet Motor Ordinary Shares in an adverse manner, the price and trading volume of Chijet Motor Ordinary Shares could decline.

Prior to the completion of the Business Combination, Chijet has been a privately-held company. Chijet’s lack of public company operating experience may make it difficult to forecast and evaluate its future prospects. If we are unable to execute our business strategy, either as a result of its inability to manage effectively its business in a public company environment or for any other reason, our business, prospects, financial condition and operating results may be harmed.

The trading market for Chijet Motor Ordinary Shares will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on us. If no securities or industry analysts commence coverage of Chijet Motor, its stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover us changes its recommendation regarding our Ordinary Shares in an adverse manner, or provides more favorable relative recommendations about our competitors, the price of Chijet Motor Ordinary Shares would likely decline. If any analyst who may cover us were to cease coverage of Chijet Motor or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Our issuance of additional capital stock in connection with financings, acquisitions, investments, stock incentive plans or otherwise will dilute all other shareholders.

We expect to issue additional capital stock in the future that will result in dilution to all other shareholders. We expect to grant equity awards to employees, directors, and consultants under our share incentive plan. We expect to raise capital through equity financings and debt financings in the future. As part of its business strategy, we may acquire or make investments in complementary companies, products, or technologies and issue equity securities to pay for any such acquisition or investment. Any such issuances of additional capital stock may cause shareholders to experience significant dilution of their ownership interests and the per share value of Chijet Motor Ordinary Shares to decline.

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.

Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we publish our results on a semi-annual basis through press releases, distributed pursuant to the rules and regulations of the Nasdaq Global Market. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.

As a Cayman Islands exempted company that is listed on Nasdaq, we are subject to Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from Nasdaq corporate governance listing standards, including, but not limited to, board of directors independent requirements, director nomination procedures, compensation committee matters. We are following our home country law instead of the Nasdaq listing rules that require us to obtain shareholder approval for certain dilutive events, such as certain transactions other than a public offering involving issuances of a 20% or greater interest in the company, and acquisitions of the stock or assets of another company. As a result, our shareholders may be afforded less protection than they otherwise would enjoy under Nasdaq corporate governance listing standards applicable to U.S. domestic issuers. In addition, we also follow other home country practice in lieu of the requirements under Nasdaq listing rules with respect to certain corporate governance standards with respect to the following Nasdaq requirements: